Trafalgar Property Group Plc

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF TRAFALGAR PROPERTY GROUP PLC

To the Members of Trafalgar Property Group plc

 

For the purpose of this report, the terms "we" and "our" denote MHA in relation to UK legal, professional and regulatory responsibilities and reporting obligations to the members of Trafalgar Property Group plc. For the purposes of the table on pages 13 to 15 that sets out the key audit matters and how our audit addressed the key audit matters, the terms "we" and "our" refer to MHA. The Group financial statements, as defined below, consolidate the accounts of Trafalgar Property Group plc and its subsidiaries (the "Group"). The "Parent Company" is defined as Trafalgar Property Group plc, as an individual entity. The relevant legislation governing the Company is the United Kingdom Companies Act 2006 ("Companies Act 2006").

Opinion

We have audited the financial statements of Trafalgar Property Group plc for the year ended 31 March 2024.

 

The financial statements that we have audited comprise:

·      the Consolidated Statement of Comprehensive Income

·      the Consolidated Statement of Financial Position

·      the Consolidated Statement of Changes in Equity

·      the Consolidated Statement of Cash Flows

·      Notes 1 to 20 to the consolidated financial statements, including significant accounting policies

·      the Company Balance Sheet

·      the Company Statement of Changes in Equity and

·      Notes 1 to 15 to the Company financial statements, including significant accounting policies.

 

The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and International Financial Reporting Standards adopted in the United Kingdom ("UK adopted IFRS"). The financial reporting framework that has been applied in the preparation of the Parent Company financial statements 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).

 

In our opinion:

·      the financial statements give a true and fair view of the state of the Group's and of the Parent Company's affairs as at 31 March 2024 and of the Group's loss for the year then ended;

·      the Group financial statements have been properly prepared in accordance United Kingdom adopted International Financial Reporting Standards (UK Adopted IFRS);

·      the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

·      the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

 

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 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 as applied to listed entities, 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 related to going concern

We draw your attention to Note 3a Going Concern section in the financial statements which states that the Group incurred substantial losses during the year and there was continued requirement for successful future equity or debt fund raising. The impact of this together with other matters set out in the note, indicate a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

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.

Our evaluation of the Directors' assessment of the Group's and the Parent Company's ability to continue to adopt the going concern basis of accounting included:

·      The consideration of inherent risks to the Group's and Parent company's operations and specifically their business model.

·      The evaluation of how those risks might impact on the Group's and Parent company's available financial resources.

·      Review of the mathematical accuracy of the cashflow forecast model prepared by management and corroboration of key data inputs to supporting documentation for consistency of assumptions used with our knowledge obtained during the audit.

·      Challenging management for reasonableness of assumptions in respect of the timing and quantum of cash receipts and payments included in the cash flow model.

·      Where additional resources may be required, the reasonableness and practicality of the assumptions made by the Directors when assessing the probability and likelihood of those resources becoming available.

·      Holding discussions with management regarding future financing plans, corroborating these where necessary and assessing the impact on the cash flow forecast.

·      Evaluating the accuracy of historical forecasts against actual results to ascertain the accuracy of management's forecasts.

 

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Overview of our audit approach

Scope	Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group's system of internal control, and assessing the risks of material misstatement in the financial statements.  We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the directors that may have represented a risk of material misstatement.   The Group consists of seven reporting components, of which two were considered to be significant components: Trafalgar Property Group plc and Trafalgar New Homes Limited. The significant components were subjected to full scope audits for the purposes of our audit report on the Group financial statements.   Significant components were determined based on: 1)    financial significance of the component to the Group as a whole, and 2)    assessment of the risk of material misstatements applicable to each component.   We undertook specified audit procedures on the material balances and transactions in the year on a further 3 of the components: Trafalgar Retirement+ Limited, Selmat Limited and Combe House (Borough Green) Ltd. Analytical procedures were undertaken on the two remaining components: Life Hydroponics Limited and Combe Bank (Oakhurst) Ltd.   Our audit scope results in all major operations of the Group being subject to audit work.
Overall Materiality		2024	2023
Group		£28,000	£26,400	1% of net liabilities (2023: 2% of gross assets)
Parent Company		£4,900	£19,600	2% of gross liabilities (2023: 2% of gross liabilities)
Key audit matters
Recurring	·      Undisclosed related party transactions

 

Key Audit Matters

Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those matters which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty related to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report.

Undisclosed related party transactions
Key audit matter description	The Group enters into a significant number of transactions with related parties, both intra-group transactions and with individuals related to the Group.    There is a risk that transactions (particularly any transactions which are not at arm's length) and balances with related parties are undisclosed or misclassified.
How the scope of our audit responded to the key audit matter	Our audit work in this area included the following procedures:   ·      Identifying the susceptibility of the financial statements to material misstatements from related party transactions and relationships.   ·      Obtaining management's record of related parties - who they are, the nature of these relationships, whether any related party transactions have been entered into in the year and the nature of those transactions.   ·      We performed independent searches of the Board of Directors' other appointments and shareholdings and to identify any counterparties on the list which were not included in the related party disclosures.   ·      We reviewed the movement on these balances during the year and vouched items to supporting evidence.   ·      We reviewed the minutes of meetings of the board of directors to identify any undisclosed related party relationships.   ·      We discussed with management the nature and purpose of these items and considered whether disclosure sufficiently addressed these matters.   ·      In addition, we obtained written confirmation of the balances from all disclosed parties and confirmed key terms to agreements.
Key observations	Nothing has come to our attention which indicates that related party transactions and balances are incomplete.

 

 

 

Our application of materiality

Our definition of materiality considers the value of error or omission on the financial statements that, individually or in aggregate, would change or influence the economic decision of a reasonably knowledgeable user of those financial statements.  Misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Materiality is used in planning the scope of our work, executing that work and evaluating the results.

 

Performance materiality is the application of materiality at the individual account or balance level, set at an amount to reduce, to an appropriately low level, the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole.  

 

The determination of performance materiality reflects our assessment of the risk of undetected errors existing, the nature of the systems and controls and the level of misstatements arising in previous audits. 

 

 

 

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

	Group financial statements	Parent Company financial statements
Overall materiality	£28,000 (2023: £26,400)	£4,900 (2023: £19,600)
How we determined it	1% of net liabilities (2023: 2% of gross assets)	2% of gross liabilities (2023: 2% of gross liabilities)
Rationale for the benchmark applied	Given the Group have liquidated the majority of its cash generating assets and the Parent Company actively pursuing a potential future Reverse Takeover, we now deem the net liability position of the Group to be the main measure by which the users of the financial statements assess the prospects and success of the Group. Therefore, we consider this to be the most appropriate benchmark for Group materiality.	The Parent Company is largely a holding company incurring limited costs and financing the group. As a result of historic losses and the impairment of investments, we have considered gross liabilities as the most appropriate benchmark for materiality.
Performance materiality	£16,800 (2023: £15,840) which represents 60% (2023: 60%) of overall materiality.	£2,940 (2023: £11,760) which represents 60% (2023: 60%) of overall materiality.

 

 

We agreed to report any corrected or uncorrected adjustments exceeding £1,400 (2023: £1,320) for the Group and £245 (2023: £980) for the Parent Company respectively to the Board of Directors as well as differences below this threshold that, in our view, warranted reporting on qualitative grounds.

 

Overview of the scope of the Group and Parent Company audits

Our assessment of audit risk, evaluation of materiality and our determination of performance materiality sets our audit scope for each company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. This assessment takes into account the size, risk profile, changes in the business environment and other factors when assessing the level of work to be performed at each component.

 

 

 

 

 

 

 

The Group consists of 7 components, all of which are based in the UK and audited by the Group audit team.

 

	Number of components	Revenue	Total assets	Total liabilities	Loss before tax
Full scope audit	2	N/A	96%	79%	85%
Specified Procedures	3	N/A	4%	21%	15%
Analytical Review	2	N/A	0%	0%	0%
Total	7	N/A	100%	100%	100%

 

The control environment

We evaluated the design and implementation of those internal controls of the Group, including the Parent Company, which are relevant to our audit, such as those relating to the financial reporting cycle.

 

Reporting on 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.

 

Strategic report and directors' report 

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 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 identified material misstatements in the Strategic report or the Directors' report. 

 

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters in relation to which 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 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.

 

Responsibilities of directors

As explained more fully in the directors' responsibilities statement, as set out on page x, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, the Directors are responsible for assessing the Group's and the Parent Company's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

Auditor responsibilities for the audit of the financial statements 

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 aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 

 

A further description of our responsibilities for the financial statements is located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.  

 

Extent to which the audit was considered capable of detecting irregularities, including fraud

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.

 

These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud or error. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error and detecting irregularities that result from fraud is inherently more difficult than detecting those that result from error, as fraud may involve collusion, deliberate concealment, forgery or intentional misrepresentations. Also, the further removed non-compliance with laws and regulations is from events and transactions reflected in the financial statements, the less likely we would become aware of it.

 

Identifying and assessing potential risks arising from irregularities, including fraud

The extent of the procedures undertaken to identify and assess the risks of material misstatement in respect of irregularities, including fraud, included the following:

·      We considered the nature of the industry and sector, the control environment, business performance including remuneration policies and the Group's, including the Parent Company's, own risk assessment that irregularities might occur as a result of fraud or error. From our sector experience and through discussion with the directors, we obtained an understanding of the legal and regulatory frameworks applicable to the Group focusing on laws and regulations that could reasonably be expected to have a direct material effect on the financial statements, such as provisions of the Companies Act 2006, UK tax legislation or those that had a fundamental effect on the operations of the Group.

·      We enquired of the directors and management concerning the Group's and the Parent Company's policies and procedures relating to:

-     identifying, evaluating and complying with the laws and regulations and whether they were aware of any instances of non-compliance;

-     detecting and responding to the risks of fraud and whether they had any knowledge of actual or suspected fraud; and

-     the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations.

·      We discussed among the engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.

·      We assessed the susceptibility of the financial statements to material misstatement, including how fraud might occur by evaluating management's incentives and opportunities for manipulation of the financial statements. This included utilising the spectrum of inherent risk and an evaluation of the risk of management override of controls. We determined that the principal risks were related to posting inappropriate journal entries to increase revenue or reduce costs, creating fictitious transactions to hide losses or to improve financial performance, and management bias in any accounting estimates.

 

 

 

 

 

 

Audit response to risks identified

In respect of the above procedures:

·      we corroborated the results of our enquiries through our review of the minutes of the Group's and the Parent Company's board meetings and enquiries of management regarding any ongoing legal cases;

·      audit procedures performed by the engagement team in connection with the risks identified included:

-     We have undertaken a review of minutes of meetings of those charged with governance. 

-     Performing audit work over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business, and reviewing accounting estimates for bias.

-     Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.

-     Challenging assumptions and judgements made by management in their significant accounting estimates.

·      the Senior Statutory Auditor considered the experience and expertise of the engagement team to ensure that the team had the appropriate competence and capabilities; and

·      we communicated relevant laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

 

Use of our report 

This report is made solely to the Parent 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 Parent 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 Parent Company and the Parent Company's members as a body, for our audit work, for this report, or for the opinions we have formed. 

 

 

 

 

Simon Knibbs MA FCA (Senior Statutory Auditor) 

for and on behalf of MHA, Statutory Auditor 

London, United Kingdom  

24 September 2024

 

MHA is the trading name of MacIntyre Hudson LLP, a limited liability partnership in England and Wales (registered number OC312313)