Registered number:
FOR THE PERIOD ENDED 27 JUNE 2021
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
COMPANY INFORMATION
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
CONTENTS
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
STRATEGIC REPORT
FOR THE PERIOD ENDED 27 JUNE 2021
The principal activity of the Company is the purchase and management of freehold and leasehold country pubs with rooms.
The Company has continued to face significant loss of trade from government mandated restrictions to contain the spread of COVID-19. Restrictions from the first government mandated lockdown, which came into effect on 20 March 2020, were eased on 5 July 2020 but with social distancing measures in place. A second lockdown was imposed in November 2020 and further tier restrictions in December 2020, the latter of which severely impacted trade during the critical Christmas trading period. A third lockdown came into effect in early January 2021 forcing all our pubs to shut down for trade until mid-May 2021. The stop-start nature of lockdowns during the financial year led to a 24% drop in turnover from the previous financial year and restricted trading time in the financial year to just 6 months for most of our pubs. During this period the Company took advantage of all available government support including the furlough scheme to protect as many jobs as possible. The Company also undertook a strategic review and has made significant changes to strengthen the business operating model. These initiatives together with the available government support allowed us to mitigate the drop in losses for the period to 27 June 21 as compared to the previous financial year. Despite these challenges, the Group within which this companies sits, secured sufficient funding and the Directors consider the company as a going concern. Given the ongoing shareholder support, the rollout of vaccination programme to control COVID-19 and return to normality allowing the pubs to trade without any restrictions, it was concluded that there was no material uncertainty for the business to continue to operating as a going concern.
Page 1
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 27 JUNE 2021
Dependence on key executives and personnel
The Company's success is substantially dependent on the continuing services and performance of the highly skilled pub managers and its ability to continue to attract and retain them. The Directors believe the Company's culture and remuneration packages are attractive, which should assist key staff retention. Inflation The economy is facing substantial inflationary pressures and the business continues to work closely with suppliers to mitigate this risk. The majority of our drinks procurement is under contracted prices and does not pose an immediate risk. Furthermore, the business has recruited a procurement specialist to manage this risk for the business. Licences, permits and approvals The pub industry in the UK is highly regulated at both national and local levels and pub operators require licences, permits and approvals. Delays and failure to obtain the required licences or permits could adversely affect the operation of the Company. These laws and regulations impose a significant administrative burden on each pub and additional or more stringent requirements could be imposed in the future. Each of the Company's pubs is licensed to permit, amongst other things, the sale of liquor. Should any of the Company's pub licences be withdrawn or amended, the profitability of any such pub could be adversely impacted. The Company has complied with all relevant laws and regulations. Cashflow and liquidity risk Liquidity risk is the risk the company may not be able to meet its financial obligations as they fall due. The company ensures that there are sufficient levels of committed facilities and cash, through banking arrangements within the Group and Group shareholders, to ensure that the company is able to meet its financial commitments. Liquidity risk is managed by daily and weekly monitoring of cash flow forecast and actual cash flows. The Group's loan facilities, which was due for repayment in April 2022, has been re-financed for a 6 year term. COVID-19 The COVID-19 pandemic and the resulting national lockdown has had a significant impact on the Company. To ensure business continuity and manage the crisis we have first and foremost secured sufficient funding to safeguard financial stability of the Company. We have undertaken a full business review and made changes to ensure we trade profitably coming out of lockdown and have continuously engaged with our staff and rolled out training and welfare programmes to protect their wellbeing. Our response to the crisis included ensuring the safety and wellbeing of all our staff and customers including additional cleaning, social distancing, installing COVID screens and provision of PPE. During lockdown, we had a weekly communications plan for the business to keep everyone updated on key developments, we ensured all premises were securely locked up and checked regularly, all stock disposed or returned where possible and we utilised all government support available such as the job retention scheme, business grants, VAT deferral and business rates relief. The impact of Covid-19 has seen the closure of pubs for a period of time and the implementation of government measures such as social distancing has led to changes in the way we operate. The Company will continue to comply with government guidance and has adapted its practices to ensure business continuity. The Company has put in place appropriate processes to be able to react quickly to any new restrictions that may be announced in the future. Departure from the European Union The key impact for the hospitality industry is staffing as a consequence of departing from the European Union. We have been preparing for this and have put in place competitive incentive schemes, training programmes and development opportunities to maintain staff retention.
Page 2
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 27 JUNE 2021
The directors monitor the Company's performance through a number of financial indicators; the main measurements are like for like turnover, EBITDA and net cash flow from operating activity.
Looking forwards however, and in anticipation of expansion as well as reinvestment in our current estate, we believe in rewarding our loyal staff and nurturing talent. To facilitate this, a combination of strengthening our management structure and senior teams across all areas of the business and focusing on team retention whilst not forgetting about the importance of our quality food and drink offer.
Page 3
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 27 JUNE 2021
The Directors are aware of their duties under s172 of the Companies Act 2006 to act in a way they consider, in good faith, would be most likely to promote success of the Company for the benefit of its members as a whole and in doing so have regard (amongst other matters) to:
• the likely consequences of any decision in the long-term • the interests of the company's employees, • the need to foster the company's business relationships with suppliers, customers, and others, • the impact of the company's operations on the community and the environment, • the desirability of the company maintaining a reputation for high standards of business conduct, and • the need to act fairly between members of the company. In respect of these matters, the Directors regularly consider and discuss the following: Long term impact The Company and its Leadership Team regularly reviews medium to long range business forecasts and the impact that strategic and tactical decisions can have on those plans as well as measure key performance indicators. These are debated, challenged and approval is subsequently sought from the Board. Employees Regular employee communication from the leadership team is carried out through in-person team briefings as well as emails and online Teams calls (especially during lockdown periods). Communication to and from all employees is encouraged and regular independent feedback questionnaires are issued. Employees can nominate and vote on monthly “Above & Beyond” and annual employee awards and are also encouraged to show respect and gratitude through the HR online “notice board”. The Company actively provides training and promotional opportunities to employees who demonstrate their aptitude and alignment with the Company values. During the pandemic, communication and briefings were more frequent and specific training and risk assessments were carried out to minimise the risk of infection within the workforce and create a safe place to work. Customers The Company seeks to promote premium and seamless service delivery at every stage of the customer journey, right from creating market awareness, through the booking process, every area of operation, to the departure and follow up, whilst celebrating the British Countryside. In London, the pubs aim to give the countryside feel. All our services, right from the arrival experience, the quality and generosity of the bedroom amenities, the food sourcing, menu design and presentation (to name but a few) are thoroughly thought through to make sure every possible touch point with the customer is as good as it can be. We actively engage with all online review platforms and track our performance – not just of the reviewers score, but how we handle each review. During the pandemic, we adjusted our policies so that our customers would not be disappointed and ought to communicate that with them via direct and indirect media. Suppliers We always seek long term partnerships with our suppliers (local if possible), maintaining regular communication and adhering to agreed payment terms so as to ensure regularity of supply and quality. Small, local suppliers were supported through the pandemic, making sure payments were made on time and suppliers were prepared for reopening demands. Some of our trade suppliers were able to redirect their product to our local communities during the first lockdown (when high street retailers were struggling and our wholesale suppliers had no customers) via local collection. Community & Environment We look to recruit locally or provide housing for those from further afield to be able reside locally and reduce
Page 4
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 27 JUNE 2021
commuting time and cost. We are reviewing long term sustainability and waste and made positive changes through training our employees.
Standards & Quality Standard Operating Procedures and Risk Assessments are written and regularly updated to make sure operations are both best practice and safe for our employees and customers. We took all necessary steps to ensure “Covid compliance” and have maintained our vigilance and determination to ensure the wellbeing of our employees and customers. We regularly benchmark our financial and customer review performance against our competitors. Acting fairly between stakeholders The Directors seek to ensure that employees, customers & suppliers are all communicated with and treated fairly as they acknowledge that engagement from all parties means a better result for all stakeholders in the end.
This report was approved by the board and signed on its behalf.
Page 5
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
DIRECTORS' REPORT
FOR THE PERIOD ENDED 27 JUNE 2021
The directors present their report and the financial statements for the Period ended 27 June 2021.
The directors are responsible for preparing the Strategic Report, the Directors' Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year
. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the directors are required to:
∙
select suitable accounting policies for the Company's financial statements and then apply them consistently;
∙
make judgments and accounting estimates that are reasonable and prudent;
∙
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The loss for the Period, after taxation, amounted to £
3,336,682
(2020 -
loss
£
6,004,948
)
.
The directors do not recommend the payment of a dividend (2020: £Nil).
The directors who served during the Period were:
Page 6
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE PERIOD ENDED 27 JUNE 2021
Cirrus Inns Limited values the contribution of its employees at all levels, encourages, and facilitates all employees to have meaningful learning and development plans with appropriate development opportunities identified at all levels to help reinforce this focus on employee engagement. The company provides regular and up-to-date information about its products, services and operations to employees in a variety of ways. Regular meetings are held with employees to consult, explain and discuss matters affecting employee’s interests.
Employment of disabled persons All applicants for employment, transfer and promotion of disabled persons and employees who become disabled are viewed on the same term as other employees. Reasonable adjustments are considered and appropriate training or retraining is provided as necessary.
Management have assessed the ability of the Company to continue as a going concern. The Company is reliant on the support of the Group which holds the debt and equity funding and lends this to the Company through intercompany debt.
Management have prepared cash flow forecasts out to June 2023 for the Group, taking into account the success of the vaccination rollout programme and that the Group believes it is unlikely for new national restrictions to force pub closures to happen in the near future. However, the Group remains cautious in its forecast. The forecasts reflect the fact the Group refinanced its existing debt structure in early 2022 by converting all preference shares to common equity and re-financing the loan facility, which was due for repayment in April 2022, for a 6 year term. The new capital structure has left the Group with a sustainable level of debt and strengthened the balance sheet position to enable future growth. The shareholder loan of £3m is due for repayment in August 2022 and the Group is forecast to have sufficient cash flow to repay this overdraft facility. The directors believe the existing facility headroom and forecasted cash flow allow the Group to continue as a going concern. They are also confident that the parent company has the intention and ability to continue to provide group support as and when required. For this reason, they continue to adopt the going-concern basis in preparing the Company’s financial statements. See note 24 for details on post balance sheet events.
The auditors, Haysmacintyre LLP, will be proposed for reappointment in accordance with
section 485 of the Companies Act 2006.
Page 7
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE PERIOD ENDED 27 JUNE 2021
This report was approved by the board and signed on its behalf.
Page 8
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CIRRUS INNS LIMITED
We have audited the financial statements of Cirrus Inns Limited (the 'Company') for the Period ended 27 June 2021, which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity
and the related notes, 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 Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
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 Auditors' 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 United Kingdom, including the Financial Reporting Council'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.
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.
Page 9
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CIRRUS INNS LIMITED (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' Report thereon. The directors are responsible for the other information contained within the Annual Report. 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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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.
In our opinion, based on the work undertaken in the course of the audit:
∙
the information given in the Strategic Report and the Directors' Report for the financial Period 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 Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.
Page 10
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CIRRUS INNS LIMITED (CONTINUED)
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 Auditors' 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 consider the most signficant laws and regulations that have a direct impact on the financial statements to be: – FRS102 and Companies Act 2006 compliance: We reviewed of the financial statement disclosures and perform testing on balances and disclosures. - Tax regulation: We inspected correspondence with regulators and tax authorities, and reviewed the companies tax computations; We consider the most signficant laws and regulations that have an indirect impact on the financial statements are: - Food safety and hygiene: We discussed with management to identify whether they were aware of instances of non-compliance, we reviewed board minutes, we searched for a sample of sites on the FSA website to identify whether any instances of poor ratings or breaches. - Licencing: We discussed with management to identify whether they were aware of instances of non-compliance and we reviewed board minutes. - Minimum wage: We discussed with management to identify whether they were aware of instances of non-compliance, we reviewed board minutes, we remain alert for any breaches during our sample testing on payroll and we considered the uniform policy. We considered the following areas to be those where the financial statements are most susceptible to fraud: – Revenue recognition: We evaluated management’s controls designed to prevent and detect irregularities in revenue, we completed a cash reconciliation to agree the revenue recognised to bank receipts and we completed cut off testing on receipts around the year end. - Management overide of controls: We evaluated management’s controls designed to prevent and detect irregularities and we sampled and tested journals, in particular journal entries posted with unusual account combinations, postings by unusual users or with unusual descriptions, and we challenging assumptions and judgements made by management in their critical accounting estimates. – Government grants under the Coronavirus Job Rentention Scheme (CJRS): We obtained and understanding of the systems and process in place over claims, we agreed the bank receipts to the amount recognised in the accounts for these grants, and we tested a sample of employee claims ensuring the calculations were correct and the conditions were complied with.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities
. This description forms part of our Auditors' Report.
Page 11
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CIRRUS INNS LIMITED (CONTINUED)
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 Auditors' 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.
for and on behalf of
10 Queen Street Place
EC4R 1AG
Page 12
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 27 JUNE 2021
Page 13
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
REGISTERED NUMBER:
07680497
STATEMENT OF FINANCIAL POSITION
AS AT
27 JUNE 2021
The financial statements were approved and authorised for issue by the board and were signed on its behalf by
:
The notes on pages 16 to 31 form part of these financial statements.
Page 14
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED
27 JUNE 2021
STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED
30 JUNE 2020
Page 15
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 27 JUNE 2021
Cirrus Inns Limited is a private limited company, limited by shares incorporated in England. The registered office is C/O Addleshaw Goddard Corporate Services, One St Peter's Square, Manchester, United Kingdom, M2 3DE.
2.
Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in
the UK and the Republic of Ireland and the Companies Act 2006
.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
The Company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
∙
the requirements of Section 7 Statement of Cash Flows;
∙
the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
∙
the requirements of Section 33 Related Party Disclosures paragraph 33.7.
This information is included in the consolidated financial statements of Cirrus Inns Holdings Limited as at 30 June 2021 and these financial statements may be obtained from Companies House.
Management have assessed the ability of the Company to continue as a going concern. The Company is reliant on the support of the Group which holds the debt and equity funding and lends this to the Company through intercompany debt.
Management have prepared cash flow forecasts out to June 2023 for the Group, taking into account the success of the vaccination rollout programme and that the Group believes it is unlikely for new national restrictions to force pub closures to happen in the near future. However, the Group remains cautious in its forecast. The forecasts reflect the fact the Group refinanced its existing debt structure in early 2022 by converting all preference shares to common equity and re-financing the loan facility, which was due for repayment in April 2022, for a 6 year term. The new capital structure has left the Group with a sustainable level of debt and strengthened the balance sheet position to enable future growth. The shareholder loan of £3m is due for repayment in August 2022 and the Group is forecast to have sufficient cash flow to repay this overdraft facility. The directors believe the existing facility headroom and forecasted cash flow allow the Group to continue as a going concern. They are also confident that the parent company has the intention and ability to continue to provide group support as and when required. For this reason, they continue to adopt the going-concern basis in preparing the Company’s financial statements.
Page 16
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 27 JUNE 2021
2.
Accounting policies (continued)
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding rebates, value added tax and other sales taxes. Revenue is generated from the sale of food and beverages in premium pubs, as well as the provision of accomodation.
Food and beverage revenue is recognised at the point of sale and the below criteria must be met before revenue is recognised: • the Company has transferred the significant risks and rewards of ownership to the buyer; • the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; • the amount of revenue can be measured reliably; • it is probable that the Company will receive the consideration due under the transaction; and • the costs incurred or to be incurred in respect of the transaction can be measured reliably. Accomodation revenue is recognised in the period in which the services are provided when all of the following conditions are satisfied: • the amount of revenue can be measured reliably; • it is probable that the Company will receive the consideration due under; • the accomodation has been provided to the customer. • the costs incurred can be measured reliably.
Goodwill
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
The estimated useful lives range as follows:
Page 17
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 27 JUNE 2021
2.
Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
is applicable, the cost of the investment in a subsidiary undertaking is measured at the nominal value of the shares issued together with the fair value of any additional consideration paid.
Page 18
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 27 JUNE 2021
2.
Accounting policies (continued)
Page 19
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 27 JUNE 2021
2.
Accounting policies (continued)
At the period end, no VAT return is due as the returns are no co-terminous. The OTSS creditor balance therefore reflects the amount owed for VAT as at 27 June 2021 for this company only. The subsidiary companies recognise there own VAT liabilities until the next quarter return is prepared, at which point the intercompany adjustment noted is made. The companies in the VAT group are jointly and severably liable for the liability owed.
Page 20
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 27 JUNE 2021
2.
Accounting policies (continued)
Grants are accounted under the accruals model as permitted by FRS 102.
Grants of a revenue nature are recognised in the Statement of Comprehensive Income in the same period as the related expenditure. Grants were received by the company indirectly, through its parent (Cirrus Inns Limited) who operates the group PAYE scheme. The parent company claimed grants in the year under the Coronavirus Job Rentention Scheme (CJRS) for the company's employees, and on receipt they were paid to this entity. They have been recognised as Other Income in the Statement of Comprehensive Income in the period in which they were intended to compensate for furloughed employees. Grants were also received directly under the Hospitality and Leisure grant scheme for entities impacted by Covid-19. The grants claimed related to the rateable value of the properties held. The amounts have been recognised at the point they were announced and are included in Other Income.
Page 21
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 27 JUNE 2021
(a) Estimated impairment of property and equipment and intangibles The company is required to review property and equipment and intangibles for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable. When a review of impairment is conducted, the recoverable amount of an asset or cash-generating unit is the greater of its value in use or fair value less cost to sell. A cash-generating unit has been identified as an individual site, and therefore the net book value of the fixed assets and the associated goodwill us used when considering impairment. Based on the historic performance of the assets and the current market environment management have considered that discounted cash flow is the best reflection of the value in use. A third party valuation was also performed in December 2020 for bank purposes which management have considered as part of their impairment consideration. Management considered the environment to be different as at 30 June 2021 and December 2020 due to the impact of COVID-19, therefore historic and expected performance, and a discounted cash flow was considered most reflective of management’s view of the value in use. Management highlight the following key areas of judgement / estimation in the impairment review: Management have used a discount rate of 8.9%. This is based on the Group's weighted average cost of capital, increased by 1% point as an estimate for risk factor for a private company and the market conditions. Management have performed sensitivity analysis increasing the discount rate by 1%. The increase in discount rate indicates an impairment of £174,629. Management have used a growth rate of 2% into perpetuity. This is based on the strategic review taken to improve the operating model of the business to ensure there is long term sustainable growth. Management have performed sensitivity analysis decreasing the growth rate by 1%. The decrease in growth rate indicates an impairment of £116,820. In addition to the above, the forecast EBITDA and the investment horizon are areas of judgment in the model. Were the forecast EBITDA's not achieved by the sites then there could be a material impact on the impairment review. A 10% decrease in forecast EBITDA leads to an impairment of £114,347. The investment horizon used for freehold sites was to perpetuity, and for leasehold sites this was capped at 4 years. (b) Depreciation and amortisation Depreciation and amortisation are provided so as to write down assets to their residual values over the estimated useful lives. The selection of these residual values and estimated lives requires the exercise of management's judgement. Were the actual useful lives to differ from the estimates, there could be a material impact on the net realisable value of tangible fixed assets and intangible fixed assets. (c) Intercompany debt recovery Intercompany debt recovery has been assessed taking into account post year end repayments, the post year end reassignment and capitalisation of debt as disclosed in note 23, and the future trading forecasts of the company who owes the debt. This assessment used forecast future EBITDA and multiple on sale of investment to estimate the recovery of the capitalised debt. If the forecast EBITDA or multiple was not to be achieved, then there is a risk that the intercompany debt would not be recoverable and a provision would be required.
Page 22
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 27 JUNE 2021
Page 23
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 27 JUNE 2021
Page 24
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 27 JUNE 2021
Page 25
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 27 JUNE 2021
11.
Taxation (continued)
No provision has been made for deferred tax losses as it is not sufficiently certain when these losses will
be utilised. The net deferred tax asset not recognised is £1,833,249 (2020: £1,446,367).
Page 26
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 27 JUNE 2021
Page 27
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 27 JUNE 2021
Page 28
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 27 JUNE 2021
Page 29
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 27 JUNE 2021
Profit and loss account
Page 30
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIRRUS INNS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 27 JUNE 2021
Post year end the company continued to be impacted by Covid-19 restrictions. Restrictions were lifted in full on 19 July 2021. No restrictions have been brought back since this date, but customer concern over the Omicron variant in December 2021 did have an impact on sales. On 16 August 2021 one of the pub assets with the company was sold for £650,000, as this asset did not fit the future strategic plan of the Group. On 18 May 2022 one of the pub assets within the Company was sold for £1,200,000 as this asset did not fit the future strategic plan of the Group.
The company's ultimate parent undertaking is Cirrus Inns Holdings Limited, a company registered in
England and Wales (company registration number 07680490). The consolidated financial statements of Cirrus Inns Holdings Limited can be obtained from Companies House. Due to its majority shareholding, the controlling party is Cloudy Pubs Limited, whose registered office is at Gaspé House, 66-72 Esplanade St Helier Jersey JE2 3QT.
Page 31
|