Directors’ Report

The directors present their report and the financial statements for the year ended 31 December 2022.

Principal Activity And Review Of The Business

The principal activity of the Group during the year continued to be property investment. The Group’s other activities include the operation of a concert hall and hotels. A review of the Group’s business during 2022 and its future prospects is contained in the Strategic Report on pages 8 to 47.

Dividends

Interim dividends of £76,571,000 (2021 – £34,119,000) were declared and paid during the year.

Risk Management

A summary of the principal risks and uncertainties has been included in the Strategic Report on pages 41 to 47.

Directors

Of the directors listed on page 92, all held office for the financial year and up to the date of this report, except Dame Alison Nimmo who was appointed to the Board on 10 March 2022.

The ultimate holding company maintains liability insurance for its directors and officers and for those of its subsidiaries in respect of proceedings brought by third parties, subject to the conditions set out in section 234 of the Companies Act 2006. Such qualifying third party indemnity provision remains in force as at the date of approving the Directors’ Report.

Charitable Contributions

The Group’s direct charitable contributions for the year were £425,000 (2021 – £273,000). In addition, the Cadogan Charity, a shareholder in the company, makes donations to a variety of local and national charities.

Going Concern

The group’s business activities, together with the factors likely to affect its future development, its financial position, financial risk management objectives, details of its financial instruments and derivative activities, and its exposures to price, credit, liquidity and cash flow risk are set out in the Strategic Report on pages 8 to 47.

The group has considerable financial resources derived from an established investment property portfolio in prime central London. The group has substantial longterm committed financing arrangements and has access to overdraft and revolving credit facilities from its bankers. The overdraft is renewed annually and therefore not committed for the full review period.

The directors have considered the appropriateness of adopting the going concern basis in preparing the financial statements for the year ended 31 December 2022 taking into account new inflationary pressures on the economy, consumers and our tenants and the possibility of an economic downturn. The assessment is based on the Group’s experience over the last three years and financial forecasts for the periods to 31 December 2024 overlaid with a severe but plausible downside economic downturn scenario.

The budget for 2023 has been prepared prudently. Assumptions regarding rent receipts and lease renewals are more prudent than our actual experience during 2022. Development and investment activity increases further during 2023. Property values are assumed to fall by 5% on average in 2023.

The Group has also assessed a severe but plausible downside scenario based on the occurrence of an economic downturn having an impact similar to that of the pandemic in its first year. An economic downturn would reduce sales for our retail, leisure and hospitality tenants, damaging their cash flow and ability to pay rent. Trading would take at least 12 months to recover. The main impacts would be a further fall in property values, a decline in rent collections for at least 12 months, with a slow recovery thereafter and an increase in impairments and rent concessions.

For 2023 and 2024, we have assumed there would be no new financing activity other than repayments of maturing private placement loan notes of £11.6m in August 2023, annual payments in March of £4m on a long-term loan and the receipt of £50m in September 2024 from the delayed drawdown of private placements undertaken in 2022.

The severe but plausible downside scenario modelled demonstrates that over the period to 31 December 2024 the group has significant liquidity to fund its ongoing operations and is operating with ample headroom above its debt financing covenants without the need to rely on raising new financing. Asset values would have to fall by 38% from 2022 closing values when the covenant is measured as at 31 December 2023 and by 33% from closing 2022 values over two years as at 31 December 2024 to breach the gearing covenant. To breach the interest cover covenant, operating profit before capital items would have to fall by 50% compared to budget in 2023 and by 50% compared to the forecast for 2024.

Based on these considerations, our experience of the past impact of economic downturns on the business and the directors’ knowledge of Cadogan’s property portfolio and the market in which we operate, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements.

DIRECTORS’ RESPONSIBILITIES STATEMENT

The directors are responsible for preparing the annual report and financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including FRS 102. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the company and of the profit or loss of the Group for that period. In preparing those financial statements, the directors are required to:

- select suitable accounting policies and then apply them consistently;

- make judgements and estimates that are reasonable and prudent;

- state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Disclosure Of Information To The Auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information, being information needed by the auditor in connection with preparing its report, of which the auditor is unaware. Having made enquiries of fellow directors and the Group’s auditor, each director has taken all the steps that they are obliged to take as a director in order to make themself aware of any relevant audit information and to establish that the auditor is aware of that information.

Auditor

BDO LLP were appointed as auditor during the year. A resolution concerning the re-appointment of BDO LLP as auditor will be proposed at the forthcoming annual general meeting.

By order of the board

PAUL LOUTIT SECRETARY

4 May 2023