The directors present the strategic report for the year ended 30 April 2022.
In my report to you last year I indicated that trading signs were positive, we were optimistic and sales performance levels were returning to where they were pre-pandemic. I am pleased to report this qualified optimism turned out to be justified and we have seen a recovery of our trading position and profitability, albeit with the assistance of COVID-related Government support initiatives.
Financial Summary
Turnover £9,343,204 - an increase of £5,398,930 on previous year
Profit Before Interest & Tax £574,359 - an increase of £1,286,118 on previous year
Profit Before Tax £420,713 – an increase of £1,303,763 on previous year
Profit After Tax £100,894 - an increase of £937,351 on previous year
Total shareholder funds increased by 2.5% to £4,082,936. Our cash funds position remains strong with a balance of £2,679,433, reflecting the continued strength of forward bookings.
The increase of £1,686,151 in creditors falling due within one year, is largely because one of the loans from Barclays is falling due for renewal this year.
The Profit before Interest and Tax Figure of £574,359 was supported by a total of £104,669 in COVID related Government grants in the year, plus a rates reduction of £220,000 which we will not have the benefit of in 2022/23.
There is a significant tax figure reflected in the accounts of £319,819. This is predominantly an adjustment for deferred tax, in advance of the changes in corporation tax from April 2023. The tax payable for this year will be £41,412.
Trading Review
In many ways this was a successful year, and the business was able to operate with a good degree of normality. However, there are underlying issues that restricted our ability trade to full capability.
The impact of labour market shortages is evident and have restricted capacity in all areas of the business and continue to do so.
Hotel occupancy in Langdale of 64.6% and Brimstone 83.7% were strong performances, particularly considering that for much of the year Langdale had to take ten rooms out of letting and Brimstone selectively restricted availability. The achieved room rates were strong and market leading at £150.94 and £307.69, respectively. A programme of refurbishment of Langdale hotel bedrooms began in early 2022. Accommodation revenues are the key driver of sales in our business and keeping the product refreshed and value for money is vital to maintaining occupancy volumes.
Timeshare rentals performed extremely well with an occupancy of 96.6% of all weeks made available, achieving an average selling price of £1,438.55.
Re-sale weeks also had a strong performance with 174 weeks being resold on behalf of Owners. Demand for re-sale weeks has been strong throughout the last two years, there are currently around 250 weeks for sale, the lowest number for many years.
Obviously, the occupancies were boosted by the inability or difficulty for customers to holiday overseas. However, there is an indication that people have been reawakened to the benefits of holidaying in the UK. Although we do expect demand to wane as overseas destinations open to UK tourism, long term we anticipate demand for The Lakes and Langdale will remain strong.
The areas of the business which suffered the greatest impact of restrictions were, food and beverage, leisure, and spa. Limitations on capacity and operating hours resulted in disappointment for owners and other guests and a significant negative impact on turnover and profitability in these areas.
Stove restaurant capacity was, at times, reduced by up to 50% and limitations remain, dependent on the availability of people to service the demand.
Wainwrights traded much closer to pre-pandemic levels returning a departmental profit of £258,825. It was assisted by a major refurbishment of the kitchen and stores area, which has significantly improved workflow and productivity, while at the same time creating a much better working environment for the kitchen team. This has increased the potential capacity and planned investment in outdoor seating areas should see continued growth.
The leisure club is an area of the business, which is regarded, particularly by most timeshare owners, as an essential service. There has always been disproportionate cost to revenue base in this department, which is ever increasing with rising energy costs. The trading loss in this department for last year was in excesses of £250,000. Opening restrictions are a direct result of not having sufficient qualified people to operate safely. We are committed to operating a full service in this department when staffing allows, while at the same time looking to mitigate rapidly increasing operating costs.
The demand for spa has been strong and, despite restrictions, Brimstone Spa returned to profitability. The volumes in thermal areas were high, driven by hotel occupancies and treatment revenue was only limited by the availability of staff. We expect demand for spa to continue, recruitment of qualified spa therapists and an in-house training programme will be key to capitalising on this.
Similar personnel challenges are evident in every sector of the economy and when combined with the inflationary pressures that we are all aware of, creates difficulties with supplies, their delivery and cost and unfortunately this is having an impact on all our guests; Langdale operates on very small margins and therefore cost absorption capability of the business is extremely limited. The team are constantly seeking ways to mitigate these, though ultimately price increases in some areas are inevitable.
Investment in carbon reducing technologies is underway to help minimise the spiralling energy costs, and while this is helpful, it is not enough to stop above inflation increases.
The last 12 months have presented multiple operational challenges, all have been taken on by Managing Director, Michael Coletta and his team with the professionalism that we have come to expect. My thanks go to each and every member of that team for their effort and dedication to deliver the best possible level of service, at times in very difficult circumstances.
Vacancies have been at record highs in the hospitality sector throughout this year and this is expected to continue for at least another 24 months, affecting Langdale’s ability to recruit. Those who are available for employment are demanding much higher rates of pay and shorter working hours. These changes have forced Langdale to increase pay for all staff at levels above inflation to assist with retention and recruitment and adjust its recruitment models away from the “normal” full time model to a more flexible one, which requires more people to provide the same service. It is the latter point that has placed the most strain on the team as positions are not being filled.
In December 2021 and into January 2022, the vacancies were compounded by an upsurge in isolations due to the spread of Covid over the festive period. At one point the business was missing 20% of its team and it was during this time that the true spirit of Langdale came through, as colleagues stepped up and supported each other and the business.
The team always try to achieve the best possible service for all our guests, but there has to be a consideration given to the welfare and protection of our employees, therefore over the last year, regrettably, there have been times when areas of the business have been closed or services restricted simply because of vacancies, and this has continued into the summer period.
The team are working hard to turn this situation around, but the availability of affordable housing in the area is a major limiting factor and this has, if anything, deteriorated as a result of the pandemic. To help alleviate this we will be restarting the staff accommodation development project, in the expectation that it will assist recruitment.
We continue with the process of managed change at Board level. Don Camilleri recently retired from the Board to make way for Alan James, who was the final candidate of three selected from the last recruitment process.
We thank Don for his 23 years of service as a director and particularly for his extensive knowledge and advice during the development of the spa facilities.
Alan has been an owner and shareholder for over ten years and brings to the Board a wealth of knowledge in project management and construction.
The remaining three long standing directors, Dale Watler, myself and Ian Hamilton have given a commitment to step aside in successive years from 2023. We recently launched a recruitment campaign for candidates for the vacancies which will be created, with interviews and a selection process taking place in the autumn.
The board has continued its work to strengthen board governance (board responsibilities and organisational well-being).
There has been a review of several operating policies, reaffirming Langdale values and its approach to business, as well as introducing a process of auditing internal business controls. The board also supported the appointment of a third-party health & safety advisor to underpin health & safety risk management across the estate.
The Articles of Association have not changed since the company was originally formed. With the launch of the Langdale Owners Club returned weeks scheme, the Articles of LOP required amending to accommodate this. The opportunity has been taken to review and refresh the Articles to support good governance, reflecting the company of today. Proposed changes being subject to shareholder approval at the AGM.
The first annual board evaluation review was completed, prompting healthy and transparent debate amongst the board and senior management team, illustrating the continued desire to improve the accountability and delivery of the board.
Stakeholder engagement will be a major focus next year. Building on the development and introduction of the LOP website to improve shareholder communications a representative from the Langdale Owners Club Committee is now invited to attend, observe and represent owners’ views at LOP board meetings.
Strong board governance will remain a key focus, with Anne Durnall, Company Secretary continuing to support the board in this work.
Sustainabilty
The team at Langdale continue to be focussed on sustainability and have committed to the aspiration to decarbonise the business by 2037 in line with the Lake District National Park Authority and others in the area. We are working with long standing partner Small World Consulting on the action plan to help the team get to net zero.
The trajectory to get to net zero will form an integral part of the comprehensive environmental action plan that has already been developed for the whole team at Langdale to be part of.
We will continue to look at projects and give a high priority to those which reduce our carbon footprint and help offset the spiralling cost of energy. A project to upgrade the Leisure Club roof will begin later this year and will include a large array of solar panels designed to support the energy usage in this area.
We continue to support several organisations including landscape and environmental projects through the Lake District Foundation with our visitor giving programme. Dan Visser, Director of Sales is on their board of trustees.
We have ongoing engagement with a range of stakeholders including shareholders, timeshare owners, communities, and other organisations in the Lake District and beyond. The engagement with owners is focussing on the long-term future direction of the company and its Purpose, Vision and Values which follows the work already carried out with the board and senior management team.
A significant work stream included the previously mentioned Purpose, Vision and Values, which continues to be a “work in progress” as wider stakeholder engagement is currently ongoing, we hope to present in more detail on this at the AGM.
Last year we held a hybrid AGM, which in theory shareholders could choose to attend in person or on-line. The reality was COVID was still with us, and we recommended that attendance should be virtual. This year we will also have a hybrid meeting, we hope to be able to positively encourage shareholder attendance at the physical meeting.
Future
There is a large degree of uncertainty in the next 12-24 months.
Economists widely expect that rising inflation, interest rates and higher tax burdens will lead to a significant drop in customer demand. Staff shortages and lack of candidates for vacant positions will continue to hinder capacity. The business will face pressures from increased energy costs, wage inflation, food inflation, increased National Insurance contributions and other taxation. Fuel costs increases also hit businesses in rural areas disproportionately, goods deliveries and costs for staff travel to and from work will all have a negative impact.
We expect demand to remain strong, the ability to service the demand will be critical to success. There are currently more than 30 full time equivalent positions vacant across the business. Finding quality people to fill these positions, which will allow departments to operate to their full potential, is the key to covering an ever-increasing cost base and to sustained profitability.
All of the above makes the year ahead one which will be very difficult to predict and manage and with this uncertainty, the Board feel it would not be prudent to reinstate a shareholder discount on management fees at this time.
What we do know is, whatever the situation in the economy, Langdale is better positioned than most leisure businesses. We have a loyal and passionate shareholder and timeshare owner base and a growing following of hotel customers. Combine this with a motivated management team led by Michael Coletta, a core of dedicated team members, plus a committed and supportive Board of Directors and we should have confidence that together we will steer the business through these difficult times, to greater success.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 April 2022.
The results for the year are set out on page 12.
The directors have not recommended a dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The company holds or issues financial instruments in order to achieve three main objectives, being:
to finance its operations;
to manage its exposure to interest and currency risks arising from its operations and from its sources of finance and;
for trading purposes.
In addition, various financial instruments (e.g. trade debtors, trade creditors, accruals and prepayments) arise directly from the company's operations.
The auditor, MHA Moore and Smalley, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
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 specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud is detailed below:
Enquiries with management about any known or suspect instances of non-compliance with laws and regulations and fraud;
Challenging assumptions and judgements made by management in their significant accounting estimates;
An evaluation of the risk of management override of controls and subsequent testing, including through testing journal entries and other adjustments for appropriateness;
An evaluation of the company's internal control environment; and
Reviewing board minutes and resolutions.
Because of the industry in which the company operates, we identified the following areas as those most likely to have a material impact on the financial statements: Health and safety, compliance with food safety and licencing regulations, employment law, and compliance with the Companies Act.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of noncompliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
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.
Langdale Leisure Limited is a private company limited by shares incorporated in England and Wales . The registered office is The Langdale Estate, Great Langdale, Ambleside, LA22 9JD.
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 £.
As a qualifying entity, the company has taken advantage of the reduced disclosure exemptions permitted under FRS 102 as follows:
The requirements of Section 7 ‘Statement of Cash Flows’ and Section 3 'Financial Statement Presentation' paragraph 3.17(d).
The requirements of Section 11 ‘Basic Financial Instruments’ paragraphs 11.29 to 11.28A and Section 12 ‘Other Financial Instrument Issues’ paragraphs 12.26 to 12.29A.
Section 33 ‘Related Party Disclosures’ - Compensation for key management personnel.
Langdale Leisure Limited is a wholly owned subsidiary of Langdale Owners PLC and the results of Langdale Leisure Limited are included in the consolidated financial statements of Langdale Owners PLC which are available from Companies House, Cardiff.
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 .
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial 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 and bank loans , are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. 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.
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 following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
In determining the appropriate depreciation rates for the Company’s assets, management reviews the operating policies of the business and makes judgements as to the applicable useful economic lives of the assets, considering residual values.
At the inception of each lease, management undertake an assessment of the terms of the lease including payments to be made over the life of the lease, the fair value of the asset subject to the lease, the length of the lease and whether the terms of the lease transfer substantially all of the risks and rewards of ownership.
Based on this assessment, management will determine whether the lease should be classified as a finance or operating lease.
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.
At the acquisition date of the property, management made an assessment of the useful life of the property. They have used their knowledge of the business, geographical area and the property itself in reaching a decision of a useful life of 50 years.
Management have also assessed the estimated residual value of the property at the end of its 50 year useful life. Using the factors noted above they have reached an appropriate residual value which has been applied in the depreciation calculation.
An analysis of the company's turnover is as follows:
Grants received during the year, represent income under the Coronavirus Job Retention Scheme (CJRS) to reimburse the company for costs incurred in retaining staff who we were furloughed due to the impact of closure in response to COVID-19 and local council support grants.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2021 - 1).
The actual charge/(credit) for the year can be reconciled to the expected charge/(credit) for the year based on the profit or loss and the standard rate of tax as follows:
Factors affecting future tax and charges
In the budget on 3 March 2021, the UK Government announced an increase in the main corporation tax rate from 19% to 25% with effect from 1 April 2023. The change in rate was substantively enacted on 24 May 2021. Deferred tax has been calculated at this rate which was the rate substantively enacted at 30 April 2022 and expected to apply on crystallisation.
Freehold land and buildings with a carrying amount of £6,715,774 (2021 - £6,889,733) have been pledged to secure borrowings of the company.
The bank borrowings are secured by a debenture and cross guarantee between Langdale Leisure Limited and Langdale Owners PLC. Two loans with Barclays Bank are repayable by quarterly instalments until they are due to be refinanced in September 2022 and March 2026. The interest rate is calculated at 3.51% and 2.96 % respectively.The third loan with Barclays Bank is repayable in monthly instalments and is due to end in 4 years. Interest is being charged on this loan at a variable rate.
Deferred tax assets and liabilities are offset where the 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:
As at the signing date of these financial statements, the company has not finalised its capital expenditure programme for the forthcoming year and therefore an assessment as to the likely movement of other relating timing differences cannot be made.
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
The company has taken advantage of the exemption permitted under Section 33 'Related Party Disclosures' paragraph 33.1A from disclosing transactions with its parent company.
At 30 April 2022, the company's ultimate parent company was Langdale Owners Plc which is a parent of both the smallest and largest groups of which the company is a member. Copies of the consolidated financial statements of Langdale Owners Plc are available from Companies House.