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Transform Sch NL Fd (73GD)

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Thursday 25 April, 2013

Transform Sch NL Fd

Annual Financial Report

RNS Number : 2473D
Transform Schools (N.Lanarks)FdgPLC
25 April 2013
 

 

Company Registration No. 5358471

 

Transform Schools (North Lanarkshire) Funding plc

 

Report and Financial Statements

31 December 2012

 

 


 

Directors' report                                                                                                                                                                                1

Directors' responsibilities statement                                                                                                                                            4

Independent auditor's report                                                                                                                                                            5

Profit and loss account                                                                                                                                                                      7

Balance sheet                                                                                                                                                                                      8

Notes to the financial statements                                                                                                                                                    9

 


The directors have pleasure in presenting their annual report together with the audited financial statements and auditors' report for the year ended 31 December 2012.

Principal activities and business review

The Company's principal activity is the financing of a Private Finance Initiative (PFI) concession contract with North Lanarkshire Council.

On 24 May 2005, the Company entered into a PFI concession contract with North Lanarkshire Council to design, build, finance and provide services within twenty-four primary and secondary schools.  The concession contract finishes on 31 March 2037.

The directors do not expect any significant change in the Company's activities in the following financial year.

Results and dividends

As set out on Page 7, the result for the year after taxation amounted to £nil (2011: £nil).  The directors do not propose to pay any dividend in respect of the year ended 31 December 2012 (2011: £nil).  The directors expect the Company to continue its operations for the foreseeable future.

Key performance indicators

The key performance indicator is that the Company is able to service the funding requirements through interest and capital repayments.  This is achieved through the successful operation of Transform Schools (North Lanarkshire) Limited's PFI concession contract and that its net cash flow is in line with or better than forecast.

As at 31 December 2012, the cumulative net cash outflow before financing was £98.6m, compared to a forecast value of £105.9m.  The variance (when compared with the Financial Close model) is due to working capital timing differences which are expected to reverse over the remaining life of the project.

Going concern

The Company believes that future economic benefits will cover the obligations that arose from the financing of the construction of the project for North Lanarkshire Council.

The directors have also considered the ability of North Lanarkshire Council (the Council) to continue to pay the Unitary fees, due under the Concession contract, to the Company and do not consider this to be a material risk.  The Company's forecasts and projections, taking into account reasonably possible counterparty performance, show the Company expects to be able to continue to operate for the full term of the concession.

After making enquiries, 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 financial statements.

Financial risk management

The financial risks which the Company is exposed to are credit risk, interest rate risk and liquidity risk.  The directors' approach to financial risk management is provided in Note 10.

Supplier payment policy

The Company's policy is to pay suppliers thirty days from the date of receipt of the supplier's agreed invoice, unless otherwise contractually agreed, and this policy is made known to all suppliers on request. Trade creditors of the Company at 31 December 2012 were £nil (2011: £nil) based on the average daily amount invoiced by suppliers during the year.



Directors

The following were directors of the Company during the year:

J. Graham

R.K. Sheehan

R.W. Christie              (appointed 1 February 2012)

J.E. Haan                     (appointed 1 February 2012)

Directors indemnities

The Company has made qualifying third party indemnity provisions for the benefit of its directors which remain in force at the date of this report.

Directors' share interests

No director had any interest in the issued share capital of the Company or any other Group Company at 31 December 2012 (2011: £nil).

Political and charitable contributions

The Company made no political or charitable contributions during the year (2011: £nil).



Auditor

Each of the persons who is a director at the date of approval of this report confirms that:

·    so far as the director is aware, there is no relevant audit information of which the company's auditor is unaware; and

·    the director has taken all the steps that he/she ought to have taken as a director in order to make himself/herself aware of any relevant audit information and to establish that the company's auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.

Deloitte LLP have expressed their willingness to continue in office as auditor and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting.

 

Approved by the Board of Directors
and signed on behalf of the Board

R.K. Sheehan

Director

19th April 2013

Registered office:

8 White Oak Square
London Road
Swanley
Kent
London
BR8 7AG

 


The directors are responsible for preparing the annual 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).  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 company and of the profit or loss of the company for that period.  In preparing these 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 are sufficient to show and explain the company's transactions 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 2006.  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.

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

The directors confirm that to the best of their knowledge:

i)          the financial statements, prepared in accordance with United Kingdom Generally Accepted Accounting practice, give a true and fair view of the assets, liabilities and financial position of the company; and

ii)         the management report, which is incorporated into the directors' report, includes a fair review of the development and performance of the business and the position of the company together with a description of the principal risks and uncertainties that they face.

Signed on behalf of the Board of Directors of Transform Schools (North Lanarkshire) Funding plc on 19th April 2013.

 

R.K. Sheehan
Director

Registered office:

8 White Oak Square
London Road
Swanley
Kent
London
BR8 7AG

 


 

Independent auditor's report to the members of
Transform Schools (North Lanarkshire) Funding plc

 

We have audited the financial statements of Transform Schools (North Lanarkshire) Funding plc  for the year ended 31 December 2012 which comprise the profit and loss account, the balance sheet and the related notes 1 to 15.  The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

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.

Respective responsibilities of directors and auditor

As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.  Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland).  Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the audit of financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error.  This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements.  If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on the financial statements

In our opinion the financial statements:

·    give a true and fair view of the state of the Company's affairs as at 31 December 2012 and of its result for the year then ended;

·    have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

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

Opinion on matters prescribed in the Companies Act 2006

In our opinion the information in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.



Independent auditor's report to the members of
Transform Schools (North Lanarkshire) Funding plc  (continued)

 

Matters on which we are required to report by exception

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, or returns adequate for our audit have not been received from branches not visited by us; or

·    the 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.

 

 

 

 

Makhan Chahal FCA

for and on behalf of Deloitte LLP

Chartered Accountants and Statutory Auditor

London, United Kingdom

19th April 2013


Notes

2012

£'000

2011

£'000

 

 

 

 

Interest receivable and similar income

4

10,371

10,544

 

 

 

 

Interest payable and similar charges

4

(10,371)

(10,544)

 

 

 

 

Profit on ordinary activities before taxation

 

-

-

Tax on profit on ordinary activities

5

-

-

 

 

 

 

Retained profit on ordinary activities after taxation for the financial year

12

-

-

 

 

 

 

 

All activities are derived from continuing operations in the United Kingdom.

There were no recognised gains or losses for either the current year and the preceding year other than those stated in the profit and loss account above; consequently no statement of total recognised gains and losses is presented.

 

 


Notes

2012
£'000

2011
£'000

 

 

 

 

Current assets

 

 

 

Debtors: amounts falling due within one year

6

8,223

7,776

Debtors: amounts falling due after more than one year

7

179,427

181,646

 

 

 

 

Current liabilities

 

 

 

Creditors: amounts falling due within one year

8

(1,399)

(1,421)

Borrowings: amounts falling due within one year

9

(6,824)

(6,355)

 

 

 

 

Net current assets

 

179,427

181,646

 

 

 

 

Total assets less current liabilities

 

179,427

181,646

 

 

 

 

Creditors: amounts falling due after more than one year

9

(179,377)

(181,596)

 

 

 

 

Net assets

 

50

50

 

 

 

 

Capital and reserves

 

 

 

Called up share capital

11

50

50

Profit and loss account

12

-

-

 

 

 

 

Total equity shareholders' funds

 

50

50

 

 

 

 

 

 

The financial statements of Transform Schools (North Lanarkshire) Funding plc , registered number 5358471, were approved by the Board of Directors on 19th April            2013.

Signed on behalf of the Board of Directors

 

 

 

R.K. Sheehan

Director


1.         Accounting policies

The financial statements are prepared in accordance with applicable United Kingdom accounting standards.  The particular accounting policies adopted are described below.

a)    Basis of preparation

The financial statements have been prepared in accordance with applicable United Kingdom law and accounting standards and under the historical cost convention.  They include the result of the activities described in the Directors' Report, all of which are continuing.

b)    Going Concern

The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the Directors' Report on pages 1 to 3.  The financial position of the Company, its cash flows, liquidity position and borrowing facilities are described in note 10 to the financial statements.  This note to the financial statements includes the group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposures to credit risk and liquidity risk.

The current economic conditions create some general uncertainty. The directors have considered the ability of Transform Schools (North Lanarkshire) Limited (a related company) to pay interest amounts due to the Company and do not consider this to be a material risk.  After making enquiries, the directors have a reasonable expectation that the Company 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.

c)    FRS 25 Financial Instruments: Presentation, FRS 26 Financial Instruments: Recognition and Measurement and FRS 29 Financial instruments: Disclosure

FRS 25 and FRS 26 are required to be adopted by listed companies.  The Company holds listed debt and has therefore prepared its accounts in accordance with FRS 25 and FRS 26.  The Company, its Parent and all Subsidiaries of Transform Schools (North Lanarkshire) Holdings Limited adopted FRS 25 and FRS 26 to ensure that consistent accounting policies are applied within the Group.

FRS 26 provides the requirements for the measurement, recognition and derecognition of financial instruments. Adoption of the standard results in the measurement of the Company's financial liabilities at amortised cost using the effective interest rate method.

FRS 29, which requires certain disclosures in respect of financial instruments, is applicable for periods beginning on or after 1 January 2007 and is required for entities applying FRS 26.  The Company has elected to take the exemptions permitted in FRS 29 as the results are included in the publicly available consolidated financial statements of Transform Schools (North Lanarkshire) Holdings Limited, which include disclosures that comply with FRS 29.

d)    Taxation

Current tax is provided at amounts expected to be paid or recovered using the tax rates and laws that have been enacted, or substantively enacted, by the balance sheet date.  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 that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date.  Timing differences are differences between the Company's taxable profits and its results stated in the financial statements that arise from the inclusion of gains or losses in tax assessment periods different from those in which they are recognised in the financial statements.  A deferred tax asset is regarded as recoverable and therefore recognised only to the extent that, on the basis of the evidence available, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

 

1.         Accounting policies (continued)

e)    Cash flow statement

The Company is exempt from the requirement of Financial Reporting Standard No.1 (Revised) 1996 to prepare a cash flow statement as it is a wholly-owned subsidiary of Transform Schools (North Lanarkshire) Holdings Limited, which prepares consolidated financial statements that include a cash flow statement and are publicly available.

f)     Finance costs

Finance costs of debt are charged in the profit and loss account over the term of the instrument at a constant rate on the carrying amount.

g)    Financial liabilities and equity

Financial liabilities and equity are classified according to the substance of the contractual arrangements entered into.  An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.  Other instruments are classified as liabilities if they contain an obligation to transfer economic benefits and if they are not included in shareholders' funds.  The finance cost recognised in the profit and loss account in respect of capital instruments other than equity shares is allocated over the term of the instrument.

h)    Senior secured bonds and term loan

Senior secured bonds and term loans are initially stated at the amount of the net proceeds after deduction of related issue costs.  The carrying amount is increased by the finance cost in respect of the accounting period and reduced by payments made in that period.  The index-linked secured bonds and index-linked secured term loan are each valued at amortised cost, using the effective interest rate method, taking account of projected indexation across the term of the liability.

2.         Remuneration of directors and employees

Directors emoluments for the year amounted to £nil (2011: £nil).  The Company has no employees (2011: none).

3.         Auditor's remuneration

The audit fee for the Company was borne by Transform Schools (North Lanarkshire) Limited in both the current year and preceding year and amounted to £1,000 (2011: £1,000).



4.         Interest

 

 

2012
£'000

2011
£'000

 

 

 

 

Interest receivable and similar income comprises:

 

 

 

Interest on intercompany loan to Transform Schools (North Lanarkshire) Limited

 

10,371

10,544

 

 

 

 

Interest payable and similar charges comprises:

 

 

 

Interest and fees on bonds and loan

 

10,371

10,544

 

 

 

 

5.         Taxation

The results for the year do not give rise to a tax charge (2011: £nil).

6.         Debtors: amounts due within one year

 

 

2012
£'000

2011
£'000

 

 

 

 

Amounts owing from Transform Schools (North Lanarkshire) Limited

 

8,223

7,776

 

 

 

 

7.         Debtors: amounts falling due after more than one year

 

 

2012
£'000

2011
£'000

 

 

 

 

Amounts owing from Transform Schools (North Lanarkshire) Limited

 

179,427

181,646

 

 

 

 

Amounts owing to Transform Schools (North Lanarkshire) Funding plc represents a loan which is made up of the proceeds of £72,796,000, £5,850,000 and £9,150,000 index linked secured bonds, a £70,000,000 loan from European Investment Bank, £17,194,683 subordinated loan stock and a £50,000 direct loan.  The balance is stated after the deduction of unamortised issue costs of £4,963,339 (2011: £4,963,339).  The terms and conditions applicable to Transform Schools (North Lanarkshire) Limited are the same as those applicable to Transform Schools (North Lanarkshire) Funding Plc (see Note 9).

8.         Creditors: amounts falling due within one year

 

 

2012
£'000

2011
£'000

 

 

 

 

Interest accrued

 

1,399

1,421

 

 

 

 

 

 

 

 

9.         Borrowings

 

 

2012
£'000

2011
£'000

 

 

 

 

Borrowings

 

186,201

187,951

 

 

 

 

Borrowings:

 

 

 

Index-linked secured bonds

 

93,940

94,994

Index-linked secured loan

 

75,177

75,873

Subordinated loan

 

17,084

17,084

 

 

 

 

 

 

186,201

187,951

 

 

 

 

 

 

 

 

Repayable as follows:

 

 

 

Within one year

 

6,824

6,355

Between one and two years

 

7,118

6,813

Between two and five years

 

21,336

21,246

After five years

 

150,923

153,537

 

 

 

 

 

 

186,201

187,951

 

 

 

 

The index-linked secured bonds due 2036 of £87,796,000 were created on 8 June 2005, all of which were issued and sold.  Interest on the bonds is payable semi-annually at a rate of 2.343% plus RPI indexation, commencing on 30 September 2005.  Unless previously redeemed or purchased and cancelled, the bonds will mature on 31 March 2036.

The index linked bank secured term loan is from the European Investment Bank with repayments commencing September 2008 and semi-annually thereafter until September 2034.  The loan bears interest at a rate of 1.950% plus RPI indexation.  The bank loan has certain covenants attached.

The borrowings are secured by a fixed and floating charge over the whole of the Company's undertaking and assets.

The secured subordinated loan stock has been subscribed by Transform Schools (North Lanarkshire) Funding plc.  The loan stock bears interest at 7.550% above the six month LIBOR rate, and is repayable in instalments between 2009 and 2033.  It is secured by second fixed and floating charges over the undertaking, property, assets and rights of the Company.



10.       Financial instruments

The Company's financial instruments comprise borrowings.  The main purpose of these financial instruments is to raise finance for the Transform Schools (North Lanarkshire) Group operations.  The Company has not entered into derivative transactions.  It is, and has been throughout the period under review, the Company's policy that no trading in financial instruments be undertaken.  The main risks arising from the Company's financial instruments are interest rate risk and liquidity risk.  The Board reviews and agrees policies for managing each of these risks and they are summarised below.  These policies have remained unchanged throughout the period.

Interest rate risk

The Company's exposure to adverse movements in interest rates on its borrowings is matched by an equal but opposite exposure on amounts owing from Transform Schools (North Lanarkshire) Limited with the same maturity.

Liquidity risk

The Company's policy throughout the year has been that, to ensure continuity of funding, all of its borrowings should be matched by amounts owing from Transform Schools (North Lanarkshire) Limited with the same maturity.

Credit risk

The Company's credit risk is primarily attributable to its other receivables however this is mitigated as the counterparties are all related parties.

Interest rate profile

The interest rate profile of the Company's financial liabilities was as follows:

 

 

 

2012
£'000

2011
£'000

 

 

 

 

 

Borrowings

 

 

186,201

187,951

 

 

 

 

 

The index-linked bonds have interest payable at a rate of 2.343% plus RPI indexation on a principal amount that is also subject to RPI indexation.

The bank term loan has interest payable at a rate of 1.950% plus RPI indexation on a principal amount that is also subject to RPI indexation.

The loan stock has interest payable at a rate of 7.550% above the six month LIBOR rate.

Borrowing facilities

The Company had no more undrawn committed borrowing facilities at 31 December 2012.



10.       Financial instruments (continued)

Fair values

 

Book value

Fair value

 

2012
£'000

2011
£'000

2012
£'000

2011
£'000

 

 

 

 

 

Index-linked bonds

93,940

94,994

97,656

106,514

 

 

 

 

 

Index-linked loans (excluding unamortised arrangement fees)

75,177

75,873

80,632

88,614

 

 

 

 

 

Subordinated loan stock

17,084

17,084

7,392

12,275

 

 

 

 

 

Market value has been used to determine the fair value of the index-linked bonds.

The fair value of the index-linked loan and the subordinated debt have been calculated by discounting the expected future cash flows at prevailing interest rates.  Expected future cash flows have been calculated assuming that future increases in the Retail Price Index are constant at 2.5%.  The UK gilt yield curve and an assumed credit spread of 1% for the index-linked loan and 1% for the subordinated debt, have been used as appropriate discount rates.

11.       Called up share capital

 

 

 

2012
£'000

2011
£'000

Authorised:

 

 

 

 

Equity: 50,000 ordinary shares of £1.00 each

 

 

50

50

 

 

 

 

 

Allotted, called up and fully paid:

 

 

 

 

Equity: 50,000 ordinary shares of £1.00 each

 

 

50

50

 

 

 

 

 

12.       Profit and loss account

 

 

2012
£'000

2011
£'000

 

 

 

 

At 1 January

 

-

-

Result for the year

 

-

-

 

 

 

 

At 31 December

 

-

-

 

 

 

 

13.       Commitments

Capital commitments at the end of the financial year are £nil (2011: £nil).

 



14.       Related party disclosure

Transform Schools (North Lanarkshire) Funding plc has issued £87,796,000 bonds and borrowed £70,000,000 from the European Investment Bank and issued £17,194,693 in subordinated loan stock and lent these funds less issue costs on to a fellow subsidiary of Transform Schools (North Lanarkshire) Holdings Limited, Transform Schools (North Lanarkshire) Limited.

It also made a £50,000 direct loan to Transform Schools (North Lanarkshire) Limited in 2005.

Interest receivable from Transform Schools (North Lanarkshire) Limited for the year amounted to £10,371,000  (2011: £10,544,000).

15.       Ultimate parent undertakings and controlling parties

The Company is a 99.998% subsidiary of Transform Schools (North Lanarkshire) Holdings Limited, which is incorporated in Great Britain and registered in England and Wales.  The directors consider the ultimate controlling parties to be Equitix Education 2 Limited and Innisfree Nominees Limited acting as manager for Innisfree PFI Secondary Fund LP and Innisfree PFI Secondary Fund 2 LP.

The only company in which the result of Transform Schools (North Lanarkshire) Funding Plc are consolidated is Transform Schools (North Lanarkshire) Holdings Limited.  Copies of the financial statements are available from the registered office at 8 White Oak Square, London Road, Swanley, Kent, London BR8 7AG.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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