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Peterbrgh (Prg Hlth) (50PS)

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Wednesday 25 February, 2009

Peterbrgh (Prg Hlth)

Annual Report and Accounts

RNS Number : 8750N
Peterborough (Progress Health) plc
25 February 2009
 





Peterborough (Progress Health) plc



Report and financial statements for the period ended

31 March 2008



Registered number: 06054624



Contents


Company information

2



Directors' report

3-6



Statement of directors' responsibilities in respect of the directors' report and the financial statements 

7



Independent auditors' report 

8



Profit and loss account

9



Statement of total recognised gains and losses

10



Balance sheet

11



Cash flow statement

12



Notes to the financial statements

   13-26








 




Company information


Directors


P Cooper

(Chairman)


M Wayment



G Quaife



D Collins



L Esau



M Dooley



M Bradshaw





Company Secretary

T Rowbury 


Registered Office

3 White Oak Square
London Road
Swanley
Kent
BR8 7AG


Auditors

Ernst & Young LLP
1 More London Place
London 
SE1 2AF









 




Directors' report

The directors present their report and the audited financial statements for the period ended 31 March 2008.


Results and dividends

The loss for the period, after taxation, amounted to £5,155,000. The directors are unable to recommend the payment of a dividend.


Comparative information

The Company was incorporated on 16 January 2007. This is the Company's first accounting period and therefore the financial statements contain no comparative information.


Principal activities and review of the business 

The principal activities of Peterborough (Progress Health) plc (the 'Company') are the financing, design, construction and maintenance of a new acute hospital ('ECH'), a new mental health unit ('MHU') and a new integrated care centre ('ICC') at two sites in Peterborough together with the operation of certain non-clinical services within the existing and new hospital facilities, as part of the strategic redevelopment scheme for the Peterborough and Stamford Hospitals NHS Foundation Trust, the Cambridgeshire and Peterborough Mental Health Partnership NHS Trust and the Peterborough Primary Care Trust respectively  (the 'Trusts'under the Government's Private Finance Initiative ('PFI'). The directors are not aware, at the date of this report, of any likely major changes in the Company's activities in the next year.


On 4 July 2007, the Company entered into a Project Agreement with the Trusts, together with an associated construction contract, funding agreements, hard and soft facilities management services contractsmedical equipment supplies contract and  other ancillary project related agreements.  The Project Agreement requires the Company to provide and maintain three new hospital facilities for the Trusts, and to deliver certain non-clinical services over the 35 year concession term. The project is currently in the construction phase and the Company is providing interim services to the existing hospital facilities.


On 4 July 2007, the Company authorised the creation of £446,115,000 of 5.581% guaranteed secured bonds due 2042 of which £396,115,000 were issued.


Key performance indicators 


1. Completion of construction sections in line with the construction contract 

The achievement of sectional completions in accordance with the contractual timetable is a key indicator of satisfactory performance under the design and build contract as the unitary charge income from the Trust increases with each completed section. The completion dates for the new hospitals are in April 2009 for the ICC and the MHU and December 2010 for the ECH. The current construction programme indicates that these completion dates will be achieved on schedule.


2. Performance deductions under the service contracts

Financial penalties are levied by the Trusts in the event that performance standards set out in the Project Agreement are not achieved. All deductions are passed on to the contracted service providers under the terms of their sub-contract, however the quantum of the penalties is an indication of the level of performance. During the period to 31 March 2008, no penalties have been levied.


3. Financial performance

The Company has modelled the financial outcome of the project over the 35 year concession term and this has shown the project to be profitable. The Company monitors actual financial performance against this anticipated performance including monitoring the cash flows and profit or loss after tax on a regular basis.  As at 31 March 2008, the Company is in the first year of a construction phase of a 35 year hospital PFI concession and as such the Company is currently in a loss making position. This is consistent with the modelled position, with the first period the group is forecast to make a profit being 2012


Principal risks and uncertainties

The PFI hospital concession assets produce revenues which are index-linked to movements in the UK Retail Prices Index ('RPI'). Variations in revenue as a result of changes in RPI are mitigated as: (i) a proportion of the Company's costs, including facilities management services, also vary in accordance with changes in RPI; and (ii) the Company has entered into an RPI swap whereby it pays out an element of its RPI-linked income to receive fixed rate income to cover its fixed rate finance costs. The hospital concession asset revenues generate the cash flows with which the Company funds its operating costsfinance costs and repayments due on its financial liabilities. These revenues are secured under contract from the Trusts, whose liabilities are effectively underwritten by the Secretary of State for Health. The Company passes on design, construction, availability and performance risks to its various sub-contractors via sub-contracts.


The obligations of these sub-contractors are underwritten either by performance guarantees issued by banks or by parent company guarantees. The Company is responsible for the funding of lifecycle expenditure throughout the concession term. The timing and quantum of the finances available to settle this expenditure has been reviewed and compared to the forecast lifecycle expenditure. The directors consider the amounts available to settle this expenditure appropriate for the remainder of the project concession term.


Financial risk management policies and objectives

The Company's financial instruments comprise trade and other receivables, a finance debtor, short term bank deposits, fixed rate guaranteed investment contracts ('GICs'), trade creditors, retentions, bank loans, fixed rate bonds and loan notes and an RPI swap. The financial structure has been established to ensure that the cash flows from the PFI hospital concession assets are sufficient to meet all interest and principal payments and other liabilities as they fall due.


The Company does not undertake financial instrument transactions which are speculative or unrelated to the Company's trading activities. Board approval is required for the use of any new financial instrument, and the Company's ability to enter into any new transactions is constrained by covenants in its existing funding agreements. Exposure to price riskcash flow risk,  credit risk, liquidity risk and interest rate risk arises in the normal course of the Company's business.


The Company's exposure to, and management of, price risk, cash flow risk, credit risk, liquidity risk and interest rate risk is described below: 

Price Risk

The Company's price risk is principally managed through a 35 year Project Agreement with the Trusts providing for payments that are fixed subject to performance anRPI indexation and through sub-contracts with suppliers that largely mirror the provisions of the Project Agreement.  


Cash Flow Risk

Cash flows are generated from the availability of the hospital facilities and from the provision of facilities management services. The risk of exposure to variability in cash flows is mitigated as performance risk deductions are passed on to the relevant service providers. A portion of the Company's costs, relating to facilities management services provided by its suppliers, varies in accordance with RPI. The impact of this is mitigated by equivalent contractual entitlements relating to RPI in the Company's Project Agreement with the Trusts. The portion of the Company's revenues which does not relate to provision of facilities management services also varies in accordance with changes in RPI. The Company has entered into an RPI swap with a leading European bank whereby it pays over a portion of its RPI-linked income to receive fixed rate income to cover its fixed rate finance costs.


Credit risk

The Company's credit risk is concentrated as its only clients are the respective Trusts. The directors consider that this risk is mitigated as the project cash flows are secured under the Project Agreement which is a long term contract with the Trusts, whose liabilities are effectively underwritten by the Secretary of State for Health.   


Liquidity Risk

The Company's liquidity risk is principally managed through financing the Company by means of long term borrowings which are tailored to match the expected cash flows arising from the Company's PFI hospital concession assets and its RPI swap arrangements, described above.


Interest Rate Risk

The Company's policy is to manage the cost of its borrowing through the use of fixed rate debt. Whilst fixed rate interest bearing debt is not exposed to cash flow interest rate risk, there is no opportunity for the Company to enjoy a reduction in borrowing costs in markets where rates are falling. In addition, the fair value risk inherent in fixed rate borrowing means that the company is exposed to unplanned costs should debt be restructured or repaid early as part of the liquidity management process.


Capital Management

The Company's capital and debt structure is set out in the project financial model at the commencement of the project. The equity and debt has been subscribed for in accordance with this model to date.


Directors

The directors who held office during the period ended 31 March 2008 and up to the date of this report are shown below:


Appointed

Resigned

Appointed

Loviting Limited

16 January 2007

12 March 2007


Serjeants' Inn Nominees Limited

16 January 2007

12 March 2007


M Bradshaw

12 March 2007

30 August 2007

20 November 2007

A Hunter

12 March 2007

30 August 2007


M Dooley

21 March 2007



L Esau

18 June 2007



D Collins

18 June 2007



P Cooper

18 September 2007



J Entract

18 September 2007

8 July 2008


M Wayment

8 July 2008



G Quaife

18 September 2007




Policy on payment of creditors

It is the Company's policy to comply with the payment terms agreed with suppliers. Where payment terms are not negotiated the Company endeavours to adhere with suppliers' standard terms. The Company had £971,000 of trade creditors at 31 March 2008 and an average payment period of 25 days.

Disclosure of information to the auditors

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 Company's auditor, each director has taken all the steps that he / she is obliged to take as a director in order to make himself / herself aware of any relevant audit information and to establish that the auditor is aware of that information.


A
uditor

Ernst & Young LLP were appointed as auditor on 18 September 2007In accordance with Section 385 of the Companies Act 1985, a resolution to reappoint Ernst & Young LLP as auditor is to be proposed at the next General Meeting.


By order of the board



T Rowbury

Secretary



 

 





Statement of directors' responsibilities in respect of the directors' report and the financial statements


The directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.  

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).  

The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.  

In preparing 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 proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 1985.  They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.


 




Independent auditors' report to the members of Peterborough (Progress Health) plc

We have audited the Company's financial statements for the period ended 31 March 2008 which comprise the profit and loss  account, statement of total recognised gains and losses, balance sheetcash flow statement and related notes 1 to 26. These financial statements have been prepared under the accounting policies set out therein.

This report is made solely to the Company's members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors  

The directors' responsibilities for preparing the annual report and the financial statements in accordance with applicable United Kingdom law and Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Directors' Responsibilities.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the directors' report is consistent with the financial statements. 

In addition we also report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed.  

We read the directors' report and consider the implications for our report if we become aware of any apparent misstatements within it.  

Basis of audit opinion  

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company's circumstances, consistently applied and adequately disclosed.  

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.  

 
Opinion 
In our opinion: 
·         the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the Company’s affairs as at 31 March 2008 and of its loss for the period then ended; 
·         the financial statements have been properly prepared in accordance with the Companies Act 1985; and 

·         the information given in the directors’ report is consistent with the financial statements.

 



Ernst & Young LLP  

Registered auditor

London  



Profit and loss account

for the period ended 31 March 2008

 




Notes

Period from 16 January 2007 to 31 March 2008






£'000




Turnover

4

121,426 




Cost of sales

5

(123,609)



_______

Gross loss


(2,183)




Operating costs

6

(17)



_______

Operating loss


(2,200)




Interest receivable and similar income

9

14,700

Interest payable and similar charges 

10

(17,655)



_______

Loss on ordinary activities before taxation


(5,155)




Tax on loss on ordinary activities 

11

-



_______

Loss on ordinary activities after taxation


(5,155)



_______ 




There is no difference between the historical cost loss and the loss stated above. 

All of the results relate to continuing activities.

Movements in reserves are shown in note 19.




 

  Statement of total recognised gains and losses

for the period ended 31 March 2008





Period from 16 January 2007 to 31 March 2008






£'000




Loss for the period


(5,155)




Loss on cash flow hedge taken to reserves


(22,074)




Deferred tax relating to cash flow hedge


6,181



_______

Total losses relating to the period


(21,048)



_______ 



  

Balance sheet

at 31 March 2008





Notes

2008

Current assets





£'000

Debtors:






Amounts falling due within one year




12

8,787

Amounts falling due after more than one year




13

122,670






_______






131,457







Short term investments




14

260,909

Cash at bank and in hand





36,604






_______






428,970







Creditors: Amounts falling due within one year




15

(29,878)






_______

Net current assets





399,092







Creditors: Amounts falling due after more than one year




16

(420,090)






_______

Net liabilities





(20,998)






_______







Capital and reserves






Called up share capital




18

50

Profit and loss account




19

(5,155)

Unrealised gains and losses reserve




19

(15,893)






_______

Equity shareholders' deficit




20

(20,998)






_______


These financial statements were approved by the board of directors on 23rd February 2009

and were signed on its behalf by:


M Dooley




 


Cash flow statement

for the period ended 31 March 2008


Notes

Period from 1January 2007 to 31 March 2008



£'000




Net cash outflow from operating activities

21

(113,245)




Returns on investment and servicing of finance

22

8,682




Taxation

22

-



________

Net cash outflow before management of liquid resources and financing 


(104,563)




Management of liquid resources



Cash placed on guaranteed investment contracts


(260,909)




Financing

22

402,076






_______

Increase in cash 

23

36,604



_______




Reconciliation of net cash flow to movement in net debt



Increase in cash in the period 


36,604

Cash outflow to guaranteed investment contracts 


260,909

Proceeds from issue of subordinated debt


(1,768)

Net proceeds from issue of bonds and bank loan 


(400,258)



________

Change in net debt resulting from cash flows


(104,513)







Net debt at 16 January 2007


-



________

Net debt at 31 March 2008

23

(104,513)



________



 



Notes to the financial statements

At 31 March 2008


1     Basis of preparation 


The financial statements have been prepared under the historical cost convention and in accordance with applicable UK accounting standards and the Companies Act 1985. The Company has adopted FRS 29, 'Financial instruments: Disclosures' during the period. This standard requires disclosures that enable users of the financial statements to evaluate the significance of the Company's financial instruments and the nature and extent of risks arising from those financial instruments. These disclosures are included throughout the financial statements.

The profit and loss account for the period ending 31 March 2008 shows a loss of £5,155,000. The directors have reviewed the Company's projected profits and cash flows by reference to a financial model covering accounting periods up to 31 March 2043. They have also examined the current status of the Company's principal contracts and likely developments in the foreseeable future. Having reviewed the financial facilities available to the Company, the directors consider that the Company will be able to settle its liabilities as they fall due and accordingly the financial statements have been prepared on a going concern basis.  


2     Accounting policies


(i)    Finance debtor 

The Company has adopted the provisions of FRS 5 (Application Note F) in determining the appropriate treatment of the three hospital assets of the Company. After due consideration the Company has accounted for attributable expenditure during the period as a finance debtor. In accounting for costs as a finance debtor, all attributable expenditure during the construction phase of the project, excluding interest and financing costs, is included in the cost of the finance debtor. On completion of the construction phase of each hospital the amortisation of the relevant finance debtor will be calculated to write off the cost over their respective Project Agreement operational phases. 


(ii)   Interest and other financing costs

Interest and other financing costs are expensed to the profit and loss account in the period to which they relate.


(iii)  Revenue recognition 

Revenue is recognised to the extent that the Company obtains the right to consideration in exchange for its performance. Revenue is measured at the fair value of the consideration received, excluding discounts, VAT and other sales taxes or duty. The following criteria must also be met before revenue is recognised:


Revenue from construction activity

Revenue from construction activity is recognised by reference to costs incurred in the period that are expected to be recoverable and are directly attributable to the construction of the asset. 


Facilities management services - interim phase prior to completion

Revenue from the provision of the interim services to the existing hospital estate is recognised as contract activity progresses at £Nil mark up on related costs as these items are direct pass-throughs from the Trust to the contracted service providers.

 

Facilities management services - operational phase following completion

Revenue from the provision of the facilities management services to the new hospital is recognised as contract activity progresses at a mark up on related costs to reflect the value of work performed.


Interest receivable on finance debtor

Revenue in relation to the finance debtor is recognised as finance income at a project specific rate commencing when each new  hospital becomes operational.


Interest income

Revenue is recognised as interest accrues using the effective interest method. 


(iv)   Taxation

The charge for current taxation for the period is based on the result for the period, adjusted for disallowable items.


Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more, tax, with the following exception:


  • Deferred tax assets are recognised only to the extent that the directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.


Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.


(v)    Financial instruments


Financial instruments are recognised when the Company becomes a party to the contractual provisions of the instrument. Financial instruments are generally derecognised when the contract giving rise to the instrument is settled, sold, cancelled or expires.


Financial assets


The Company determines the classification of its financial assets at initial recognition and re-evaluates this designation at each financial year end.


Financial assets are initially measured at fair value, plus, in the case of financial assets not at 'fair value through profit or loss', directly attributable transaction costs.


The Company has categorised its financial assets as either 'loans and receivables' or as 'held-to-maturity investments'.


'Loans and receivables' are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, do not qualify as trading assets and have not been designated as either 'fair value through profit or loss' or 'available for sale'. Such assets are carried at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or expense over the relevant period. Gains and losses are recognised in the profit and loss account when the 'loans and receivables' are derecognised or impaired, as well as through the amortisation process. 

'Held-to-maturity investments' are non-derivative financial assets with fixed or determinable payments and fixed maturity that an entity has the positive intention and ability to hold to maturity other than:


    (a) those that the Company upon initial recognition designates as at fair value through profit or loss;

    (b) those that the entity designates as available for sale; and 

    (c) those that meet the definition of loans and receivables.


'Held-to-maturity investments' are carried at amortised cost using the effective interest method. Gains and losses are recognised in income when the investments are derecognised or impaired, as well as through the amortisation process.

 

Impairment of financial assets


The company assesses at each balance sheet date whether a financial asset or group of financial assets is impaired.


Assets carried at amortised cost


If there is objective evidence that an impairment loss on assets carried at amortised cost has been 
incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced, through the use of an allowance account. The amount of the loss shall be recognised in administration costs.


If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the profit and loss account, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.


In relation to trade receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the Company will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired debts are derecognised when they are assessed as irrecoverable.


Financial liabilities


Loans and borrowings are initially measured at fair value less directly attributable transaction costs. After initial recognition, financial liabilities are measured at amortised cost using the effective interest method. Finance charges and directly attributable transaction costs are accounted for in the profit and loss account using the effective interest method, and added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.


Derivative financial instruments and hedging


The Company uses a derivative financial instrument, an RPI swap, to hedge its risks associated with RPI income fluctuations. Derivatives are initially recorded at fair value on the date the derivative contract is entered into and are subsequently remeasured at fair value at each reporting date. The fair value of the RPI swap contract is determined by reference to market values for similar instruments.

 

The Company has designated its RPI swap as an effective cash flow hedging instrument. The hedging relationship has been formally designated and documented at its inception. This documentation identifies the risk management objective and strategy for undertaking the hedge, the hedging instrument, the hedged transaction, the nature of the risk being hedged and how effectiveness will be measured throughout its duration. The hedge is expected at inception to be highly effective in offsetting changes in cash flows and is assessed on an ongoing basis to determine that it is highly effective throughout the reporting period for which it was designated.


For cash flow hedges, the effective portion of the gain or loss on the hedging instrument is recognised directly in reserves via the statement of total recognised gains and losses, while the ineffective portion is recognised directly in the profit and loss account. Amounts taken to reserves are recycled to the profit and loss account in the periods when the hedged item is recognised in the profit and loss account.

 

3     Segment analysis 

 

The Company has one continuing activity being the financing, design, construction and maintenance of a new acute hospital, a new mental health unit and a new integrated care centre together with the operations of certain non -clinical services and this is undertaken entirely in the United Kingdom.

4     Turnover 

Turnover which is stated net of value added tax, represents income for services provided in the period. Turnover is attributable to one geographical market, the United Kingdom, and can be analysed as follows:



Period from 16 January 2007 to 
31 March 2008



£'000




Construction income


116,495

Interim services income


4,931



______



121,426



______

5     Cost of sales


  £'000

Construction costs

116,495

Interim services

4,931

Bid costs

214

Mobilisation and upfront fees

1,969


_______


123,609


_______

6     Operating costs









£'000




Project management services and associated overheads


17



_____

 

7     Auditors’ remuneration

The remuneration of the auditors is analysed as follows:


Period from 16 January 2007 to 31 March 2008
£'000

Audit of the financial statements - the Company

12



Other fees to auditors    - taxation services

5


____


17


____

 

8     Directors' emoluments and staff costs

None of the directors received any emoluments in respect of services provided to the Company in the period. The directors receive their emoluments directly from shareholder companies and do not receive any emoluments from the Company. The Company incurred fees from related parties for directors' services totalling £40,000. 


The Company operates through subcontracting services and does not directly employ any staff.

9     Interest receivable and similar income





   

£'000




Interest receivable on GICs


14,343

Interest receivable on bank deposits


357



_______



14,700



______


10     Interest payable and similar charges


£'000



Interest payable on bonds

16,490

Interest payable on loan notes

99

Interest payable on bank loans

216

Amortisation of debt transaction costs

88

Financing costs

762


_______


17,655


______

 

11     Taxation 



Period from 16 January 2007 to 31 March 2008

(a) Tax on loss on ordinary activities


£'000




Analysis of charge in period:



Current tax:



UK corporation tax on loss for the period (Note 11 (b))


-




Deferred tax: 



Origination and reversal of timing differences 


-



______

Tax on loss on ordinary activities 


-



______

(b)Analysis of credit in the period in statement of total recognised gains and losses



£'000




Deferred tax


(6,181)



______

(c) Factors affecting the current tax charge

The tax assessed on the loss on ordinary activities for the period is higher than the standard rate of corporation tax in the United Kingdom of 30%. The differences are reconciled below:



£'000




Loss on ordinary activities before tax


(5,155)



______

Loss on ordinary activities before tax multiplied by standard rate of corporation tax in the UK of 30%


(1,547)

Expenses not deductible for tax purposes


15

Unrelieved tax losses carried forward


1,532



_____

Total current tax (Note 11 (a))


-



______

(d) Deferred tax



2008



£'000

The deferred tax included in the balance sheet is as follows:



Deferred tax asset arising on loss on cash flow hedge


6,181



______


(e) Factors affecting future tax charge


The UK corporation tax rate changed from 30% to 28% from 1 April 2008. This rate change will affect the amount of future cash payments to be made by the Company. As at 31 March 2008, any deferred tax balances have been calculated at a rate of 28%.
 
A deferred tax asset of £1,430,000 in respect of trading losses available to be carried forward and offset against profits arising from the same trade has not been recognised at 31 March 2008. This is due to there being no persuasive and reliable evidence available at this time of suitable profits in the future to offset these losses.

 

12     Debtors: Amounts falling due within one year



2008



£'000




Trade receivables


793

VAT receivable


2,570

Prepayments and accrued income


5,418

Finance debtor - under construction


6



______



8,787



______



13     Debtors: Amounts falling due after more than one year 



2008



£'000




Finance debtor - under construction


116,489

Deferred tax


6,181



_______



122,670



_______


14     Short term investments



2008



£'000




Fixed rate GIC


260,909



________

The short term investments are convertible into cash within five business days net of any professional fees.


15     Creditors: Amounts falling due within one year



2008






£'000




Trade creditors


971

Bank loan


6,500

Accruals


22,407



_______



29,878



_______


The bank loan was drawn down in two tranches in September and October 2007 under the terms of a £14,500,000 Liquidity Facility Agreement dated 4 July 2007 and bore interest at rates of 6.32% per annum and 6.74% per annum respectively. The loan was repaid in full on 2 April 2008.



16     Creditors: Amounts falling due after more than one year






2008




Bonds:


£'000

At 16 January 2007


-

Bonds issued during the period  


396,115



________



396,115




Less: Unamortised transaction costs


(2,357)



________



393,758

Loan Notes:



At 16 January 2007


-

Loan notes drawn down during the period


1,768



________



1,768




Retentions payable


2,490




RPI swap


22,074



________



420,090



________

Maturity analysis




2-5 years

Over 5 years

Unamortised

issue costs

Total




£'000

£'000

£'000

£'000

Bonds



6,508

389,607

(2,357)

393,758

Loan notes



171

1,597

-

1,768




_____

________

________

________

Total



6,679

391,204

(2,357)

395,526




______

________

________

________


Guaranteed Secured Bonds due 2042

The Company has created £446,115,000 of 5.581% Guaranteed Secured Bonds due 2042 pursuant to a Bond Trust Deed and a Collateral Deed dated 4 July 2007, of which £396,115,000 were issued for cash on 4 July 2007 at an issue price of 100.009% of par. The interest is payable semi-annually in arrears on 2 April and 2 October each year. The bonds are repayable in instalments which commence on 2 April 2012 and end in October 2042.

The bonds created by the Company have the benefit of an unconditional and irrevocable financial guarantee issued by FGIC  (UK) Limited in favour of LaSalle Trustees Limited (formerly ABN AMRO Trustees Limited) as security trustee over all of the undertakings and assets of the Company   

 

Unsecured  Loan Notes due 2026

The Company has created £1,768,000 of unsecured loan notes due 2026 pursuant to a deed poll dated 4 July 2007 and  were issued for cash on that date. The loan notes bear interest at a rate of 7.47% per annum, from the date of issue until the actual final completion date of the hospital facilities and at a rate of 9.97% per annum thereafter. The interest is payable semi-annually in arrears on 2 April and 2 October each year. The loan notes are repayable in instalments which commence on 2 October 2011 and end in October 2026.

17     Financial instruments 

Financial risk management policies and objectives

An explanation of the Company's financial instrument risk management objectives, policies and strategies can be found in the directors' report.

Interest rate maturity profile of financial assets and financial liabilities

The table below sets out the carrying amount, by maturity, of the Company's financial instruments that are exposed to interest rate risk.


Fixed rate:

Finance Debtor

GIC

Loan Notes

Bonds


£'000

£'000

£'000

£'000

Within 1 year

6

173,450

-

-

1-2 years

637

80,564

-

-

2-3 years

2,147

6,895

-

-

3-4 years

4,442

-

(57)

-

4-5 years

4,772

-

(114)

(6,508)

Over 5 years

104,491

-

(1,597)

(389,607)


_______

________

_______

_______

Total

116,495

260,909

(1,768)

(396,115)


=======

========

=======

=======






Floating rate:



Cash Deposits

Bank Loan




£'000

£'000

Within 1 year



36,604

(6,500)




_______

_______

Total



36,604

(6,500)




=======

=======

Interest on financial instruments classified as fixed rate is fixed until the maturity of the instrument. Interest on financial instruments classified as floating rate is repriced at intervals of less than one year. The other financial instruments of the Company that are not included in the above table are non-interest bearing and are not subject to interest rate risk. 

 

Sensitivity analysis for variable rated financial instruments - market related interest rate risk

The Company's only floating rate borrowing, comprising a £6,500,000 bank loan, was repaid in full on 2 April 2008 and accordingly the Company is not sensitive to changes in interest rates going forward.

Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge an obligation under the contract giving rise to the financial instrument.

The Company's short term exposure to credit risk, which exists predominantly until the end of the construction period, is principally dependent on the creditworthiness of two major European investment banks which hold the company's cash balances and GICs. The contractual arrangements under the GICs require the counterparty banks to inform the Company immediately should their credit ratings fall below certain levels and thereafter to either return the cash balances within the GICs to the Company, or procure that an appropriately rated replacement bank be the new custodian of the GICs.  

The Company's long term exposure to credit risk is principally dependent on the creditworthiness of the Trusts as the Company's sole clients. The risk associated with this is mitigated as the cash flows are secured under the Project Agreement, which is a long term contract with the Trusts, whose obligations and liabilities are effectively underwritten by the Secretary of State for Health

Maximum exposure to credit risk

The carrying amount of the Company's financial assets represents the maximum credit exposure. Trade and other receivables have all been collected in full after 31 March 2008. There are no debtors that are past due on the reporting date.

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulties in meeting obligations associated with its financial liabilities. The Company's liquidity risk is principally managed through financing the Company by means of long term borrowings which are tailored to match the expected cash flows arising from the Company's PFI hospital concession assets and its RPI swap arrangements which are described in the directors' report. The maturity profile of the anticipated future undiscounted cash flows, including interest where appropriate, and based on the earliest date upon which the Company can be required to pay its financial liabilities, is as follows:



Bonds 

Loan 

Notes

Bank 

Loan

Trade

 creditors 


Retentions

RPI

Swap

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

Less than 3 months

11,056

66

6,705

971

-

-

18,798

3 to 12 months

11,056

66

-

-

-

-

11,122

1- 5 years

94,881

728

-

-

2,490

44,657

142,756

Over 5 years

804,890

2,751

-

-

-

983,259

1,790,900


_______

_______

_______

 _______

 _______

 _________

_________

Total 

921,883

3,611

6,705

971

2,490

1,027,916

1,963,576


_______

_______

_______

_______

_______

_________

_________


 

Fair values of financial assets and liabilities

Set out below is a comparison by category of carrying amounts and fair values of all the Company's financial assets and liabilities:


2008

2008


Book value

Fair value

Financial assets:

£'000

£'000

Fixed rate GIC

260,909

261,223

Cash at bank

36,604

36,604

Finance debtor under construction

116,495

116,495




Financial liabilities:



Loan notes (including accrued interest)

(1,843)

(1,843)

Bank loan (including accrued interest)

(6,705)

(6,705)

Bonds (including accrued interest) 

(404,813)

(322,818)

RPI swap

(22,074)

(22,074)


_________

_________

The other financial instruments of the Company that are not included in the above tables are short term debtors and creditors where carrying amounts are a reasonable approximation of fair value. The fair value of the finance debtor is calculated by discounting future cash flows relating to the asset. The fair values of the fixed rate GIC and bonds reflect market values. The fair value of the RPI swap has been determined by reference to the market value for a similar instrument. The fair value of the loan notes has been calculated by discounting the expected future cash flows at prevailing interest rates. The bank loan was repaid in full on 2 April 2008. The RPI swap has been assessed as a highly effective hedging instrument and at 31 March 2008, a net unrealized loss of £22,074,000 was included in equity. The Company has estimated that a 1% increase or decrease in RPI, together with a corresponding change in the discount rate would affect the net unrealised loss in respect of the RPI swap as set out below:


 


Estimated swap fair value
£'000

Effect on unrealised loss within equity
£'000

1% increase in RPI

(97,990)

(75,916)

1% decrease in RPI

39,703

61,777

.

18     Called up share capital

 
 
2008
Equity
 
£’000
Authorised
 
 
50,000 ordinary shares of £1 each
 
50
 
 
       
Allotted, called up and fully paid
 
 
50,000 ordinary shares of £1 each
 
50
 
 
       


19     Reserves



2008

2008

2008



Unrealised gains and (losses) reserve

Profit and loss

account


Total



£'000

£'000

£'000

At 16 January 2007


-

-

-






Retained loss for the period


-

(5,155)

(5,155)

Loss on cash flow hedge


(22,074)

-

(22,074)

Deferred tax on cash flow hedge


6,181

-

6,181



_______

_______

_______

At 31 March 2008 


(15,893)

(5,155)

(21,048)



___        

___        

___        

20   Movements in equity shareholders' deficit





Period from 16 January 2007 to 31 March 2008





£'000






Equity shareholders' deficit at 16 January 2007



-






Issue of share capital 




50

Retained loss for the period 




(5,155)

Unrealised loss on cash flow hedge




(15,893)





______

Equity shareholders' deficit at 31 March 2008



(20,998)





______

21   Reconciliation of operating loss to cash outflow from operating activities




   


£'000

Operating loss

(2,200)

Increase in debtors

(125,194)

Increase in creditors

14,149


________

Cash outflow from operating activities  

(113,245)


____        




22   Analysis of cash flow movements





Returns on investment and servicing of finance

£'000

Interest received

14,618

Interest paid

(5,555)

Financing costs 

(381)


_______

Net cash inflow from returns on investment and servicing of finance

8,682


____      

Taxation


Corporation tax paid

-


____      

Financing


Issue of ordinary shares

50

Bonds issued during the period

393,758

Loan notes issued during the period

1,768

Bank loan issued during the period

6,500


________

Net cash inflow from financing

402,076


____        




23   Analysis of net debt

   

At

16 January

 2007


Cash

movements

 during the period

At

31 March

2008


£'000

£'000

£'000





Cash at bank and in hand 

-

36,604

36,604

Guaranteed investment contracts

-

260,909

260,909

Bonds

-

(393,758)

(393,758)

Loan notes

-

(1,768)

(1,768)

Bank loan

-

(6,500)

(6,500)


____

_________

_________

Total

-

(104,513)

(104,513)


___  

____          

__              


24   Capital commitments



2008



£'000 

Amounts contracted for but not provided for in the financial statements


256,315



____       


25   Related party transactions


The Company's immediate parent entity is Peterborough (Progress Health) Holdings Limited which is owned by Peterborough Hospitals Investments Limited (49%), Brookfield Infrastructure (UK) Limited (30%) and Macquarie Peterborough Hospital Investments Limited (21%). The Brookfield group of companies has interests in contracts placed by the Company to develop, design and construct, maintain and deliver certain non-clinical services within the existing and the new hospitals and facilities as part of the Project Agreement entered into with the Trusts.


On 4 July 2007, the Company entered into contracts with Brookfield Construction (UK) Limited (formerly Multiplex Constructions (UK) Limited) and Brookfield Services (UK) Limited (formerly Multiplex Facilities Management (UK) Limited) for the construction of the hospital facilities and for the provision of certain services in connection with the development of the hospital facilitiesThe value of work completed up to 31 March 2008 under the contracts with the Brookfield Group was £83,105,000. As at 31 March 2008£10,825,000 remained outstanding and is included in creditors.


At the date of financial close of the Project Agreement, 4 July 2007, certain amounts were paid to the shareholder companies in respect of work performed by them and their affiliated companies in the period leading up to financial close. The amount paid to companies related to the Brookfield Group was £13,030,000 and the amount paid to companies related to Macquarie Peterborough Hospital Investments Limited was £11,485,000.


During the period ended 31 March 2008, the Company incurred costs of £13,333 in respect of directors' services from each of its three shareholder companies. 

26   Parent undertaking and controlling party

The Company's immediate parent undertaking is Peterborough (Progress Health) Holdings Limited which is owned  and jointly controlled by Peterborough Hospitals Investments Limited, Brookfield Infrastructure (UK) Limited (formerly Multiplex Infrastructure (UK) Limited) and Macquarie Peterborough Hospital Investments Limited. All of these entities are registered in England and Wales. In the directors' opinion, there is no ultimate controlling party. The largest and smallest group in which the results of the Company are consolidated is that headed by Peterborough (Progress Health) Holdings Limited, a company registered and incorporated in England and Wales. The consolidated financial statements of the group are available to the public and may be obtained from 3 White Oak SquareLondon Road, Swanley, KentBR8 7AGUnited Kingdom.





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