The directors present the strategic report for the year ended 31 December 2020.
During the year ended 31 December 2020 the group recorded a net loss of £1, 866,484 (2019 : profit of £53 7 , 643 ) and a reduction of its turnover from £17,954,84 2 in 2019 to £6,969,35 9 in 2020 .
T he directors are pleased to report that overall the group traded satisfactorily in 2020 in a tough economic climate increased by Brexit uncertainty.
The unprecedented level of disruption in 2020 caused by the COVID-19 pandemic brought the majority of the country’s economic activity to a standstill on 23 March 2020 under the ‘stay at home’ order and national lockdown imposed by the government. This resulted in the temporary closure of all sites except Stratford mixed use retail site and heightened the level of uncertainty for the group’s trading results for the remainder of the year. The government announced a conditional plan for lifting the lockdown in May 2020 paving the way for restaurants to reopen on 4 July 2020 under strict social distancing rules. However, further restrictions that followed including a 10 p.m. curfew, Covid Tier System and the second and third lockdowns resulted in severe disruptions including multiple times of temporary closures and reopening following the first lockdown.
Furthermore, the government's roadmap out of the third national lockdown saw a delay in step 4 from 21 June to 19 July 2021 when restaurants and bars were allowed to trade in full without coronavirus restrictions. The first signs of the recruitment crisis reported in July continued to disrupt the post lockdown recovery with restaurants having to reduce menu availability and operating hours, close for business on certain days at the height of the crisis in October and November 2021 . This was exacerbated by the emergence of the new Covid-19 variant Omicron first reported in UK on 27 th November triggering new restrictions on 30 th November and activation of Plan B of the England Autumn and Winter Covid 19 Strategy from 10 December 2021.
As a result of the pandemic related disruptions and closures, the mature locations (Regent Street, Denman Street, Carnaby Street, Liverpool Street and Stratford) recorded a sales decline of 60.7% when comparing 2020 figures to 2019 pre-pandemic levels whilst the emerging sites Covent Garden, New Oxford Street, and Shoreditch recorded a decline of 68.5% . The out of London locations, Manchester and Oxford City recorded a 58.2% decline. Shoryu White City operated under a concession was converted to a franchise kiosk operation effective 1 December 2019. Shoryu New Oxford Street site permanently closed on 5 October 2021 and is in the process of surrendering its lease in 2022. The details of the closure have been included in Note 27. The overall sales for the year declined by 62.0% when comparing 2020 figures to 2019 pre-pandemic levels .
A t the time of approval of these financial statements all Shoryu sites were in operation except for the New Oxford Street site.
The full year forecast for 2021 after taking into account the impact of Omicron variant (in December) recorded a like for like recovery in sales -88.3% in quarter 1 (actual), -54.1% in quarter 2 (actual), -28.3% (actual) in quarters 3 and -25.5% (forecast) in quarter 4, a reduction of 48.2% (overall -47.3%) in 2021 sales compared to the pre-pandemic 2019 level. It is difficult to accurately forecast the severity of government’s further responses to Omicron and future variants and the length of such restrictions. Based on recent experience of Shoryu post restriction recovery trajectory, the group estimates an overall 0.1% like for like sales recovery in 2022 against pre-pandemic levels in 2019. This is based on the assumptions that Plan B restrictions will be lifted by the end of January 2022 and that any further disruptions will be less severe with an acceleration of equitable worldwide vaccination initiatives, stability in the UK and the international socio-political environment.
The directors have also taken into consideration factors that may slowdown the pace of Central London footfall (12 weeks average 82% for week 46 of 2021 compared with 2019) recovery where most of the group’s trading sites are located . Factors taken into consideration are the emergence of new Covid-19 variants, how long the plan B restrictions are likely to last (currently until 26 January 2022), extended restrictions to counter the threat of Omicron variant such as circuit breaker lockdown, subdued and restricted tourist arrivals due to travel guidance and longer than expected ‘work from home if you can’ government guidance. The company will continuously adapt to the opportunities presented by the pandemic, creating more unique and engaging experiences in physical sites as well as online platforms on the back of its success of the DIY meal kits operation.
The group's key financial and other performance indicators during the year were as follows:
Unit 2020 2019
Turnover £ 6,969,359 17,954,842
Gross Profit £ 2,690,775 9,935,915
Gross Margin % 39 55
Net Profit / (loss) before tax £ (1,866,484) 537,644
The directors recognise that within the businesses there is a number of risks which may affect the performance of the group. These risks are subject to regular review and where appropriate, processes established to minimise the level of exposure.
Whilst there are welcome signs of global economic recovery in the medium to long term, factors such as the resurgence of COVID-19 variants, slow and inconsistent vaccine roll-out in developing countries together with the need to maintain stringent mobility restrictions in the face of more transmissible variants may constrain the pace of recovery and present downside risks that may cast further uncertainty to the forecasted recovery.
As applicable to the hospitality sector generally, the group will continue to be exposed to both post pandemic and Brexit economic conditions. The directors believe that the group is able to trade through a possible downturn in the economy post the crisis due to its strong customer loyalty, reputation of the brand, the strategic location of the trading outlets complemented by the option to access its products via online platforms and by regular monitoring of performance and continuous contingency planning.
The group has had to temporarily close (with the exception of the mixed use retail site at Westfield Stratford City) and adapt to takeaway and delivery only sites during the government imposed lockdowns and restrictions. The group forecasts incorporate mitigating action undertaken to reduce group costs. These include rent concessions, deferment and/or instalment payment arrangements with asset finance providers, creditors and HMRC, accessing government job retention schemes, management team pay cuts, accessing bank finance by way of Coronavirus Business Interruption Loan (CBILS) and Recovery Loan Scheme (RLS), participating in government Eat Out To Help Out Scheme, coronavirus business support grants, VAT reduction and business rates discount. In addition, Shoryu launched DIY meal kits and dark kitchen operations to serve its customers working from home, which have had a significant contribution towards mitigating losses.
Market conditions
With the expansion and consolidation of the UK ramen market in the years prior to the pandemic, the group has successfully retained its competitive edge maintaining its focus on ingredients and ability to cater to a diverse customer profile. This has enabled maintaining a balanced sales spread during the day and week. The majority of sales continue to be dominated by dining-in customers. However, the pandemic has also opened an opportunity to accelerate sales via online platforms.
The coronavirus operations planning has factored in the resilience of Shoryu (meaning ‘rising dragon’) and customer loyalty built up over the years, together with increased menu and accessible delivery options ensuring our customers individual needs are fully met whilst providing a safe and secure environment for both our customers and employees.
The group is exposed to financial risk through its financial assets and liabilities. The most important component of financial risk affecting the group is the liquidity risk. Tight working capital control together with detailed cash flow monitoring mitigate the liquidity risk.
Included in amounts falling due within one year is £8 4 0,000 due to Toridoll Holdings Corporation, the Japanese parent company of Toridoll Holding Limited (a shareholder of Shoryu Holdings Limited), relating to loans for expansion purposes which are repayable within the next 18 months .
Toridoll Holdings Corporation as in the past has been supporting the business by restructuring the loan repayments due to commence from July 2021, to be repayable over a longer period (12 monthly instalments from July 2022) on the assumption that trading will continue to recover according to the forecasts.
Since 23 March 2020, the COVID-19 pandemic has materially and adversely affected the hospitality sector generally due to the multiple lockdowns and restrictions imposed by the government, social distancing, global travel restrictions and the decline in tourists. As a result, the group and therefore the company has been significantly impacted as customer demand has dropped and therefore may have a significant impact on the overall operating results.
The group has prepared a cash flow forecast until March 202 3 under the current uncertain conditions. It is based on the key assumption that the restaurants will continue to remain open.
The directors are confident regarding the group’s long-term prospects and profitability. I t is however difficult to estimate the full impact of the COVID-19 pandemic and for how long it will last or possibility of future pandemics and the effectiveness of government intervention. The directors consider this as the key uncertainty over which they have no control.
In the event the restaurants were to close in the future due to pandemic related reasons and all of the refinancing measures as noted were not agreed or the short term government support for employee costs and tax payment deferrals were not available as forecast, then the group would need to seek financial support from its major shareholder, Toridoll Holdings Limited.
Whilst there are no binding agreements, the shareholders of Toridoll Holdings Limited have historically been very supportive of the group.
Given the associated uncertainty within the forecast, a material uncertainty exists that may cast a significant doubt on the group's ability to continue as a going concern.
The financial statements do not include the adjustments that would result if the group were unable to continue as a going concern. The directors conclusion on the group being a going concern are set out in the accounting policies (Note 1.3).
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2020.
The results for the year are set out on page 10.
No ordinary interim dividends were paid. The directors do not recommend payment of a dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
On 5 October 2021, a wholly owned subsidiary company within the group closed the restaurant permanently and will surrender its lease in 2022. Further details are included in Note 27.
The auditor s , Sobell Rhodes LLP are deemed to be reappointed under section 487(2) of the Companies Act 2006.
We have audited the financial statements of Shoryu Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2020 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard , and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty relating to going concern
In forming our opinion on the financial statements which is not modified, we have considered the adequacy of the disclosure in note 1.3 to the financial statements concerning the group’s and the company's ability to continue as a going concern.
The directors have considered the impact of the recent COVID-19 outbreak as part of the group’s and company’s going concern analysis.
The directors have modelled the impact of reduced sales and also mitigating actions available to the group to reduce costs. The projections also incorporate a number of government support initiatives recently announced and assume the group will agree an extension to its existing loans due to the exceptional circumstances. This analysis indicates the group has adequate resources to continue in operational existence for a period of atleast 12 months following the signing of the financial statements.
However in the event restaurants have to be closed, customer demand was lower than 20% of pre COVID-19 levels, the refinancing was not agreed, further landlord negotiations were not to go ahead or further government support are not available as forecasted, then the group would need to seek alternative financial support.
Due to the uncertainty as to how the COVID-19 outbreak may impact upon the group’s projected cashflows, a material uncertainty exists that may cast a significant doubt on the group’s and the company's ability to continue as a going concern.
The financial statements do not include the adjustments that would result if the group and company were unable to continue as a going concern.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's 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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit :
the information given in the strategic report and the directors' r eport for the financial year for which the financial statements are prepared is consistent with the financial statements ; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identifie d material misstatements in the strategic report and the directors' r eport .
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' r esponsibilities s tatement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements , the directors are responsible for assessing the group and parent company ' s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements .
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 enquired of Management to obtain an understanding of the legal and regulatory frameworks that are applicable to the group and c ompany. The most significant that are relevant to the group and c ompany are Data protection, Health and safety regulations, United Kingdom Generally Accepted Accounting Practice, t he Companies Act 2006 and the tax legislation in respect of c orporation tax, VAT and PAYE. We understood how the group and c ompany complies with these through enquiries of management and asked of any instances of non-compliance in these areas.
We assessed the susceptibility of the group and c ompany’s financial statements to material misstatements, including how fraud might occur through enquiries of m anagement and to understand where they considered there was susceptibility to fraud. We obtained an understanding of the controls that the group and c ompany ha ve established to address the risk that prevents, deter, and detect fraud.
We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risks of override of controls).
We considered the programmes and controls that the group and company have established to address risks identified, or that otherwise prevent, deter, and detect fraud, and how senior management monitors those programmes and controls. Where the risk was considered to be higher, we performed audit procedures to address each identified fraud risk.
Based on this understanding we designed our audit procedures to detect irregularities including fraud which primarily consisted of the following:
Identifying and testing of journal entries including large and unusual transactions to understand their rationale to review any instances of management override.
For management override relating to revenue recognition we obtained an understanding of the control environment relating to sales, the EPOS systems and the accounting systems, the cash reconciliation and recording of sales journals and also enquired with those charged with governance on instances any known fraud.
Enquiries of management and those charged with governance on instances any known fraud around actual and potential litigation claims and/or breaches in food and hygiene regulations .
Obtained detailed understanding of procedures performed around the Coronavirus Job Retention Scheme claims and performed substantive procedures to ensure that such claims were reasonable and in compliance with the regulations.
We evaluated whether the group and company's COVID-19 working environment, especially remote working, may increase the inherent risk of fraud and potential rise for incentives and pressures for fraudulent claim of government support schemes.
Enquiries of the tax engagement team that are independent of the audit team for instances of non-compliance.
The s enior s tatutory a uditor reviewed the experience and expertise of the audit engagement team to ensure that they had the appropriate competence and capabilities to identify any instances of fraud and non-compliance with the relevant laws and regulations.
The objective of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risk of material misstatement due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management .
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.
As permitted by s408 Companies Act 2006, the c ompany has not presented its own profit and loss account and related notes. The c ompany’s loss for the year was £488,249 (2019 - £11,816 loss).
Shoryu Holdings Limited (“the company”) is a private company limited by shares incorporated in England and Wales . The registered office is Unit B Premier Park, Premier Park Road, Park Royal, London, United Kingdom, NW10 7NZ.
The group consists of Shoryu Holdings Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
These financial statements have been prepared using the historical cost convention except that as disclosed in the accounting policies certain items are shown at fair value. The financial statements are prepared in sterling, which is the functional currency of the company and rounded to the nearest £1.
In these financial statements, the c ompany has applied the exemptions available under FRS102 in respect of the following disclosures:
Parent company’s profit and loss account – The company has taken advantage of the exemption in section 408 of the Companies Act from presenting its individual profit and loss account.
Related party transaction notes - The company only discloses transactions with related parties which are not wholly owned with the same group. It does not disclose transactions with its parent or with members of the same group that are wholly owned.
The significant accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented unless otherwise stated.
The consolidated group financial statements consist of the financial statements of the parent company Shoryu Holdings Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates .
All financial statements are made up to 31 December 2020 . Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the g roup.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
These financial statements are prepared on the going concern basis. The directors have a reasonable expectation that the group will continue in operational existence for the foreseeable future. However, the directors are aware of certain material uncertainties which may cause doubt on the group 's ability to continue as a going concern.
The group has net current liabilities £ 1,143,949 (2019: £ 1,170,068 ) but overall net assets of £ 928,317 (201 9 : £ 2,794,801 ) and has made a net loss of £1,8 66,484 (201 9 : profit of £ 537,644 ).
Included in amounts falling due within one year is £ 840 ,000 due to Toridoll Holdings Corporation, the Japanese parent company of Toridoll Holding Limited (a shareholder of Shoryu holdings Limited), relating to loans for expansion purposes which are repayable within the next 18 months).
Toridoll Holdings Corporation has deferred the loan repayment due in July 2021, to be payable over 12 monthly instalments after July 2022 on the assumption that trading will recover under the post lockdown conditions.
Toridoll Holdings Corporation has deferred the loan repayment due in July 2020, to be payable over 12 monthly instalments after July 2021 on the assumption that trading will recover under the post lockdown conditions.
Furthermore, included in the current liabilities is a trade debt owed to a related party under common director and shareholder of £562,466 which is a key broker for the group. The directors are confident they are able to repay the trade debt and in future if cashflow is tight, they can purchase the stocks directly from the suppliers and save the mark up charged by the related party.
The group reported on their management accounts for the period to October 2021 a draft EBITDA loss of £50,220 and a net loss before tax of £456,568 . Since 31 December 2019, the Covid 19 pandemic has materially and adversely affected the hospitality sector due to the lockdown imposed by the government, social distancing restrictions, global travel restrictions and the decline in tourists. As a result, the group has been significantly impacted as customer demand has dropped and has had a significant impact on the overall operating results.
Despite the success in the government’s roadmap out of lockdown and the high uptake of the vaccination programme, it is uncertain when the group will return to pre-pandemic profitability level from its operations. In order to address its financing requirements, the directors have put measures in place to manage cash flows by negotiating payment terms with landlords and major suppliers and claiming support from the government where available.
The group has prepared a cash flow forecast until March 2023 , under the current uncertain conditions. Based on the key assumption that the restaurants will remain open for the foreseeable future. The forecasts incorporate mitigating action undertaken to re duce group costs. Measures include rent concession negotiations with landlords, deferment and/or instalment payment arrangements creditors and HMRC, accessing government coronavirus business support grants, accessing bank finance and VAT reduction and business rates discounts. In addition, Shoryu launched DIY meal kits and dark kitchens to serve its customers working from home which have had a significant contribution towards mitigating its losses.
The group has been able to secure a 5 year bank loan amounting to £1 ,000,000 as a result of government support which is interest free with no repayments until April 2021. Furthermore the group has been able to secure a further loan with a term of 5 years for a principal sum of £ 750,000 from the bank under the government recovery loan scheme which is interest free with no repayments due until November 2021.
Furthermore, the shareholder's loan terms are being renegotiated and the next instalment has been deferred until July 2022 with repayments being spread out over the following 18 months.
The group has a strong overall balance sheet at the year end. However, it is very difficult to assess the duration of the current epidemic, further government support and it is also uncertain as to the level of customer demand and the ability of the group to cover the overheads from sales.
The long term survival of the group is dependant on future government announcements, decisions by the landlords and regaining customer confidence. In making the going concern assessment the directors are of the opinion that the group has a strong balance sheet and cash position and will be able to support the group should the situation get worse. However, a material uncertainty as to going concern does exist given the factors mentioned above.
Turnover includes revenues earned from the sale of food and drinks from the operations of restaurants.
Turnover represents net invoiced sales of food and drinks, excluding value added tax and tips. Turnover is recognised when payment is rendered at the time of sale, and is all recognised in the United Kingdom.
Trademarks, licenses and customer-related intangible assets have a finite useful life and are carried at cost less accumulated amortisation and any accumulated impairment losses.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account .
Equity in vest ments are measured at fair value through profit or loss , except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably , which are recognised at cost less impairment until a reliable measure of fair value becomes available.
I n the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the g roup’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent c ompany financial statements, investments in associates are accounted for at cost less impairment.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument. Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest m ethod unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
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. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
Deferred tax is measured using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date that are expected to apply to the reversal of timing differences.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets .
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
A defined contribution plan is a pension plan under which fixed contributions are paid into a pension fund and the group has no legal or constructive obligation to pay further contributions even if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
Contributions to defined contribution plans are recognised as employee benefit expense when they are due. If contribution payments exceed the contribution due for service, the excess is recognised as a prepayment.
Leases in which substantially all the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to profit or loss on a straight-line basis over the period of the lease. Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee.
Assets held under finance leases are recognised at the lower of their fair value at inception of the lease and the present value of the minimum lease payments. These assets are depreciated on a straight-line basis over the shorter of the useful life of the asset and the lease term. The corresponding liability to the lessor is included in the Balance Sheet as a finance lease obligation.
Lease payments are apportioned between finance costs in the Profit and Loss Account and reduction of the lease obligation so as to achieve a constant periodic rate of interest on the remaining balance of the liability.
In line with the recent amendments to FRS 102, the company has early adopted the amendments affecting accounting periods commencing on or after 1 January 2021 and recognised any changes in lease payments, arising from qualifying rent concessions, through the income statement on a systematic basis over the periods the change in lease payments is intended to compensate.
Government grants are recognised at the fair value of the asset receive d or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met . Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable . A grant received before the recognition criteria are satisfied is recognised as a liability.
The company recognises an unconditional government grant related to Coronavirus Job Retention Scheme as other income when the grant becomes receivable. Such grants are recognised on an accrual basis in line with when the expenses would have been incurred.
The company recognises small business grants as other income when the grant becomes receivable.
Comparatives
Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
In light of the COVID-19 pandemic, the group has considered whether any adjustments are required to reported amounts in the financial statements as indicated in note 26.
As indicated in Note 1.3, it is the directors' assessment that the group continues to be a going concern, however, a material uncertainty does exist as a result of the impact of the future operations due to the outbreak of COVID-19.
Accordingly, the assets and liabilities have been valued on the basis that the group will continue in business.
If this presumption is proven to be mistaken, the carrying value of assets and liabilities would need to be reappraised to reflect the impact of cessation.
In assessing whether there have been any indicators of impairment of the group's assets, the directors have considered both external and internal sources of information such as market conditions and experience of recoverability. There have been no material indicators of impairments identified during the current financial year.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The group establishes a provision for stocks in order to provide against obsolete, or damaged items and this is reviewed on an annual basis.
Operating lease rentals for the group are shown net of £645,583 of rent concessions (2019: £Nil).
Included in the group amount for government grants, includes furlough claim amounting to £1,520,725 (2019: £Nil ) and small business grants amounting to £51,725 (2019: £Nil).
Included in the government grant for the group is Coronavirus Business Interruption loan interest of £15,167 (2019: £Nil).
During the year, the group obtained business rates relief of £360,798 (2019: £Nil).
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
As total directors' remuneration was less than £200,000 in the current year, no disclosure is provided for that year.
The actual (credit)/charge for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:
The net carrying value of tangible fixed assets for the group includes the following in respect of assets held under finance leases or hire purchase contracts.
More information on impairment movements in the year is given in note 11.
Included within the net book value of land and buildings for the group above is £2,872,487 (2019 £3,440,411) in respect of short leasehold improvements on land and buildings.
Details of the company's subsidiaries at 31 December 2020 are as follows:
Registered office addresses for all the subsidiaries above is :
All of the above subsidiaries are included in the consolidation. Controls are established via share ownership by the Company, directly or indirectly through the subsidiaries,
Guarantee
The company was party to a multilateral cross guarantee and debenture dated 3 June 2015 given by subsidiary companies of Shoryu Holdings Limited to secure group borrowings.
Group
Bank Borrowings
During the year, the company borrowed £1,000,000 from its bankers through the Coronavirus Business Interruption Loan. The loan term is 4 years and is repayable in monthly installments. The loan attracts a nominal interest rate of 2.5% per annum.
The group was party to a multilateral cross guarantee and debenture dated 3 June 2015 given by subsidiary companies of Shoryu Holdings Limited to secure group borrowings. A limited guarantee has been given by two of the directors'.
Company
Bank Borrowings
During the year, the company borrowed £1,000,000 from its bankers through the Coronavirus Business Interruption Loan. The loan term is 4 years and is repayable in monthly installments. The loan attracts a nominal interest rate of 2.5% per annum.
The company was party to a multilateral cross guarantee and debenture dated 3 June 2015 given by subsidiary companies of Shoryu Holdings Limited to secure group borrowings. A limited guarantee has been given by two of the directors'.
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 3 to 4 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
After the year end one of the the group's subsidiary company is in the process of surrendering its operating lease and therefore the lease commitments below have been amended to reflect the revised commitments.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating rental leases, which fall due as follows:
On 5 October 2021, a wholly owned subsidiary company within the group closed the restaurant permanently and will surrender its lease in 2022. A lease surrender premium of approximately £175k will be paid to the landlord and the deposit of £80k will be returned to the company. Fixed assets with net book value of approximately £380k will be surrendered to the landlord at Nil proceeds in 2022.
The directors have determined that the above events are non-adjusting subsequent events. Accordingly, the financial position and results of operations as of and for the year ended 31 December 2020 have not been adjusted to reflect their impact.
The fixed assets on the balance sheet have been impaired as a result of closure of the restaurant. Accordingly, the financial position and results of operations as of and for the year ended 31 December 2020 have been adjusted to reflect their impact. More information on impairment movements in the year is given in note 11.
During the year the group entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
The following amounts were outstanding at the reporting end date: