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| Name | Symbol | Market | Type |
|---|---|---|---|
| Endeavour Sch31 | LSE:57OE | London | Bond |
| Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0 | - |
From Dec 2019 to Dec 2024
TIDM57OE
RNS Number : 1633J
Endeavour SCH PLC
27 June 2011
Company Registration Number 03672185
ENDEAVOUR SCH PLC
REPORT AND STATEMENT OF ACCOUNTS
31 DECEMBER 2010
Page
COMPANY INFORMATION 1
REPORT OF THE DIRECTORS 2
STATEMENT OF DIRECTORS' RESPONSIBILITIES 5
INDEPENDENT AUDITOR'S REPORT 6
PROFIT AND LOSS ACCOUNT 7
BALANCE SHEET 8
CASH FLOW STATEMENT 9
NOTES TO THE ACCOUNTS 10-22
Registered Office
The James Cook University Hospital
The Murray Building
Marton Road
Middlesbrough
TS4 3BW
Serving Directors
J Graham
N Rae
Alternate Directors
A Ritchie
I Hudson
Company Secretary
G Perez-Luna
Auditor
PKF (UK) LLP
Farringdon Place
20 Farringdon Road
London
EC1M 3AP
Bankers
Barclays Bank PLC
54 Lombard Street
London
EC3P 3AH
Legal Advisors
Pinsent Masons LLP
1 Park Row
Leeds
LS1 5AB
Paying Agent
The Bank of New York
One Canada Square
London
E14 5AL
ENDEAVOUR SCH PLC
REPORT OF THE DIRECTORS
The Directors have pleasure in submitting their Report and Statement of Accounts for the year ended 31 December 2010.
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
Principal Activities
The Company's principal activity is that of Private Finance Initiative Concessionaire for the South Tees Acute Hospitals Single Site Project, under the terms of a Concession Agreement dated 16 August 1999 between the Company and South Tees Acute Hospitals National Health Service Trust ('the Trust').
The Company's Concession Agreement requires it to finance, design, develop and construct and then maintain and part operate the enlarged hospital following completion of new facilities and certain other work. The concession is intended to continue for a period of 30 years after hospital completion which occurred on 16 July 2003, and the project is now in its operational phase.
Principal Risks and Uncertainties
Availability
Investment in the Project is funded primarily by Index Linked Secured Guaranteed Bonds ('the Bonds') and subordinated unsecured loan stock. During the operational phase the principal source of funds available to meet its liabilities under the Bonds will be Availability Payments received from the Trust under the Concession Agreement. Failure to achieve the forecast levels of availability would result in lower than forecast revenues and this may adversely affect the company's ability to make payments to Bondholders. There have been no deductions for unavailability in the periods covered in these financial statements.
Major Maintenance
The Company is obliged under the Concession Agreement to undertake major maintenance and plant/equipment replacement so that it continues to satisfy the standards required. There are a number of factors which could lead to higher than projected costs, such as shorter than anticipated life spans or increased inflation on specific items of plant and equipment or worse than expected condition of the residual estate. This risk has been mitigated through contractual arrangements with the subcontractor undertaking this work, as 25% of the risk of asset failure is shared with the subcontractor.
Service Performance
The Soft Services and Maintenance Services are monitored against agreed objective measures. Ultimately, poor performance may result in the Trust having the right to terminate the Concession Agreement. There have been no deductions for poor performance in the periods covered in these financial statements.
Trust Status and Performance
Failure by the Trust to perform its obligations may affect the Company's ability to meet its liabilities to Bondholders. However the Trust's obligations under the Concession Agreement are underwritten by the Secretary of State for Health.
Business Review
Income for the year of GBP39.82m (2009: GBP36.24m) and operating profit of GBP15.78m (2009: GBP15.98m) was in line with expectations.
Profit before tax is GBP4.28m (2009: GBP10.33m), and after an increase in the deferred tax provision of GBP0.82m and payment of GBP5.88m dividends (2009: GBP3.56m), retained (loss) / profit for the year is GBP(2.41)m (2009: GBP3.66m).
Interest payable is GBP11,624 (2009: GBP5,782) and this increase is due to a higher indexation charge on the bonds in the year ended 31 December 2010 as RPI for this period was significantly higher than the prior year.
In the opinion of the Directors, the project has achieved satisfactory performance in the period under review.
Key Performance Indicators
The Company's operations are managed under the supervision of its shareholders and funders and are largely determined by the detailed terms of the Concession Agreement. For this reason, the Company's Directors believe that further key performance indicators for the Company are not necessary or appropriate for an understanding of the performance or position of the Company.
Historical Performance
The Company is obliged to meet the conditions laid down in the Bond Trust Deed and Collateral Deed. To the best of the Directors' knowledge the Company has met all of the obligations contained within these Deeds and there have been no Events of Default, Potential Events of Default or Trigger Events with regards to these Deeds.
PROVISION OF INFORMATION TO THE AUDITOR
As far as each of the Directors are aware, at the time this report was approved:
-- there is no relevant available information of which the auditor is unaware; and
-- they have taken all steps that ought to have been taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.
GOING CONCERN
After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason they have adopted the going concern basis in preparing the accounts.
RESULTS AND DIVIDENDS
The result for the year was a profit after tax for the financial year of GBP3.47m (2009: GBP7.22m). The Directors have proposed and paid dividends during 2010 of GBP5.88m (2009: GBP3.56m).
DIRECTORS
The following persons served as Directors of the Company during the year.
J N Bridge (resigned 30 March 2011)
B W Dalgleish (resigned 9 March 2011)
J Graham
S Nathan (resigned 30 September 2010)
N Rae
I Hudson (appointed 21 October 2010)
A Ritchie (appointed 9 March 2011)
FINANCIAL INSTRUMENTS
The Company does not undertake financial instrument transactions which are speculative or unrelated to the Company's trading activities. The Company's funding has been arranged using the principles of project finance with the terms of the financial instruments, and the resulting profile of the debt service costs, tailored to match the expected revenues arising from the Concession Agreement.
Board approval is required for the use of any new financial instrument, and the Company's ability to do so is restricted by covenants in its existing funding agreements.
Other disclosures in respect of financial instruments are given in notes 9, 10, 11, 12, 13 and 15 to the financial statements.
POLICY ON PAYMENT OF SUPPLIERS
The Company's policy is to settle the terms of payment with suppliers when agreeing the terms of each transaction or series of transactions, and to abide by these terms of payment where it is satisfied the supplier has provided the goods or services in accordance with the agreed terms.
The average time taken to pay suppliers at the year end was 27 days (2009: 23 days).
CORPORATE GOVERNANCE STATEMENT
Historical Performance
The Company is obliged to meet the conditions laid down in the Bond Trust Deed and Collateral Deed. To the best of the Directors' knowledge the Company has met all of the obligations contained within these Deeds and there have been no Events of Default, Potential Events of Default or Trigger Events with regards to these Deeds.
The company is obliged to maintain a rating with Moody's. The company considers the rating given to it satisfactory.
Financial reporting, risk and internal controls
The Company has outsourced the financial reporting function to Health Care Projects Limited. The Board receives monthly reports from Health Care Projects Limited which address specific risks to the Company in a Risk Register which contains a summary of all material and possible risks which the Company is exposed to, and is pertinent to the industry in which the Company operates and the Company's customer and sub-contractor environment. The Board also receives monthly management accounts with explanations of variances from annual budgets and forecasts, which are in turn compared to the Financial Model, which represents the long term business plan of the Company.
Significant shareholdings and special rights
The Company is 100% owned by Endeavour SCH Holdings Limited. Endeavour SCH Holdings Limited is owned by Semperian PPP Investment Partners N(o) 2 Limited (43.83%) and Innisfree M&G PPP LP (56.17%). Both the shareholders in Endeavour SCH Holdings Limited are UK Limited Partnerships and each holds its shareholding as a long term investment.
None of the Company's ordinary shares carry any special rights with regard to the control of the Company. There are no known arrangements under which financial rights are held by a person other than the holder of the shares and no known agreements on restrictions on share transfers or on voting rights.
Director's appointment and replacement, allotments of shares and control provisions
The rules about the appointment and replacement of directors are contained in the Company's Articles of Association. Changes to the Articles of Association must be approved by the shareholders in accordance with the legislation in force at the time. The powers of the directors are determined by UK legislation and the Memorandum and Articles of Association of the Company in force from time to time.
The directors have in the past been authorised to issue and allot ordinary shares and such powers have expired.
The Company is not party to any significant agreements that would take effect, alter or terminate upon a change of control following a takeover bid. The Company also does not have agreements with any director or employee that would provide compensation for loss of office or employment resulting from a takeover.
On behalf of the Board
......................................
Ian Hudson
Director
26 April 2011
ENDEAVOUR SCH PLC
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Report of the Directors and the financial statements in accordance with applicable law and regulations. They are also responsible for ensuring that the annual report includes information required by the Listing Rules of the Financial Services Authority.
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 judgments and estimates that are reasonable and prudent;
-- state whether applicable 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 and disclose with reasonable accuracy at any time the financial position of the Company and 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 confirm, to the best of their knowledge:
-- that the financial statements, which have been prepared in accordance with UK Generally Accepted Accounting Practice, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
-- that the report of the directors' 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 it faces.
The names and functions of all the Directors are stated on page one.
On behalf of the Board
......................................
Ian Hudson
Director
26 April 2011
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF
ENDEAVOUR SCH PLC
We have audited the financial statements of Endeavour SCH plc for the year ended 31 December 2010 which comprise the profit and loss account, the balance sheet, the cash flow statement and the related notes. 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 statement of directors' responsibilities, 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 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 the 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 report and statement of accounts 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 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 2010 and of its profit 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 other matter prescribed by the Companies Act 2006
In our opinion the information given in the report of the directors for the financial year for which the financial statements are prepared is consistent with the financial statements.
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.
Jason Homewood (Senior statutory auditor)
for and on behalf of PKF (UK) LLP, Statutory auditor
London - UK
2011
ENDEAVOUR SCH PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
YEAR ENDED 31 DECEMBER 2010
Hot Features
Premium
2010 2009
Notes GBP'000 GBP'000
TURNOVER 2 39,816 36,240
Cost of sales (24,030) (20,259)
OPERATING PROFIT 3 15,786 15,981
Interest receivable 123 127
Interest payable 4 (11,624) (5,782)
PROFIT ON ORDINARY ACTIVITIES BEFORE
TAXATION 4,285 10,326
Taxation on profit on ordinary activities 6 (819) (3,102)
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 3,466 7,224
A statement of movement in shareholders' funds is shown in note 18 to the financial statements.
The results reported above relate to continuing activities. There were no recognised gains or losses in the period other than the above reported profit.
DIVIDENDS
Ordinary dividend paid not previously accrued 5,875 3,561
The notes on pages 10 to 22 form part of these financial statements.
ENDEAVOUR SCH PLC (Company number 03672185)
BALANCE SHEET
AS AT 31 DECEMBER 2010
2010 2009
Notes GBP'000 GBP'000
FIXED ASSETS
Tangible Assets 8 23 35
CURRENT ASSETS
Debtors - Amounts falling due within
one year
Debtors - Amounts falling due after 9 4,230 4,114
more than one year 10 140,589 141,811
Cash at Bank 11 17,248 20,278
162,067 166,203
CREDITORS - Amounts falling due within
one year 12 (11,332) (15,013)
NET CURRENT ASSETS 150,735 151,190
TOTAL ASSETS LESS CURRENT LIABILITIES 150,758 151,225
CREDITORS - Amounts falling due after
more than one year 13 (126,799) (126,790)
PROVISIONS FOR LIABILITIES 14 (14,467) (12,534)
NET ASSETS 9,492 11,901
CAPITAL AND RESERVES
Called Up Share Capital 16 50 50
Profit and Loss Account 7 9,442 11,851
EQUITY SHAREHOLDERS' FUNDS 18 9,492 11,901
These financial statements were approved and authorised for issue by the Board of Directors and were signed on its behalf on 26 April 2011.
Ian Hudson
Director
The notes on pages 10 to 22 form part of these financial statements.
ENDEAVOUR SCH PLC
CASH FLOW STATEMENT
YEAR ENDED 31 DECEMBER 2010
2010 2009
Notes GBP'000 GBP'000
Net Cash Inflow from Operating
Activities 18,297 18,619
Returns on Investments and Servicing
of Finance
Interest Received 125 105
Interest Paid (7,188) (5,613)
Net Cash (Outflow) on Returns
on Investments and Servicing
of Finance (7,063) (5,508)
Equity Dividends Paid (5,875) (3,561)
Investing activities
Capital expenditure - (9)
Financing
Bond - redemption (8,389) (8,898)
(Decrease) / Increase in Cash 19 (3,030) 643
Reconciliation of Operating Year Ended Year Ended
Profit to Net Cash Inflow from 31.12.10 31.12.09
Operating Activities GBP'000 GBP'000
Operating Profit 15,786 15,981
Depreciation charged 12 7
Decrease in debtors 1,112 2,679
Increase in creditors 273 478
Net movement in provisions 1,114 (526)
Net Cash Inflow from Operating
Activities 18,297 18,619
The notes on pages 10 to 22 form part of these financial statements.
ENDEAVOUR SCH PLC
NOTES TO THE ACCOUNTS
YEAR ENDED 31 DECEMBER 2010
1 ACCOUNTING POLICIES
The following accounting policies have been applied consistently in dealing with items that are considered material in relation to the Company's financial statements.
a) Basis of preparation
The financial statements have been prepared in accordance with applicable accounting standards and under the historical cost basis or the fair value basis where the fair valuing of relevant assets and liabilities has been applied.
b) Finance debtor
Costs incurred in building the acute hospital have been treated as a finance debtor as in the opinion of the Directors, the Trust enjoys substantially all the risks and rewards of ownership. Unitary charges received from the Trust are allocated between services income, interest receivable and the repayment of the finance debtor using a property specific rate so as to generate a constant rate of return in respect of the finance debtor over the life of the concession.
The finance debtor also includes accrued services income representing the difference between cumulative services income recognised in the profit and loss account and the Unitary Charge invoiced to the Trust.
Costs incurred in respect of Variation works over the course of the contract are added to the finance debtor with related contributions from the Trust being credited to it.
c) Turnover
Unitary charges are allocated between service income, interest receivable on the finance debtor and reimbursement of the finance debtor so as to generate a constant return in respect of the finance debtor over the life of the contract.
Turnover reflects the income allocated to the services provided as part of the overall project, and the interest receivable on the finance debtor.
A margin is applied to costs charged to the profit and loss account to calculate the service income credited to the profit and loss account. This margin is calculated as total income forecast to be receivable over the concession, less all life cycle and other operating costs forecast to be payable over the concession.
d) Fixed assets
Depreciation is provided by the straight line method based on anticipated useful lives as follows:
Equipment 2 - 4 years
Fixtures and fittings 10 - 25 years
e) Debt issue costs
Issue costs in respect of the Company's debt are recognised over the life of the debt using the effective interest rate method and are deducted from the carrying value of the related debt.
f) Deferred tax
As required by FRS 19 "Deferred Tax", full provision is made for deferred tax assets and liabilities arising from all timing differences between the recognition of gains and losses in the financial statements and recognition in the tax computation, except for those timing differences in respect of which the standard specifies that deferred tax should not be recognised.
Deferred tax assets and liabilities are calculated at the tax rates expected to be effective at the time the timing differences are expected to reverse. Deferred tax balances are not discounted.
1 ACCOUNTING POLICIES (Continued)
g) Life cycle costs
The estimated cost of the Company's obligation to maintain the hospital over the period of its agreement with the Trust is charged to the profit and loss account as the obligation arises. A provision has been included in the balance sheet in respect of these costs.
h) Capitalised interest
The interest cost of financing the Company's obligations under its Concession Agreement during the construction phase has been capitalised and was included in the value of asset in course of construction prior to reclassification as a finance debtor.
i) Financial Instruments
Financial instruments are recognised when the Company becomes a party to the contractual provisions of the instrument. The principal financial assets and liabilities of the Company are as follows:
Trade debtors
Trade receivables are initially recognised at fair value and then are stated at amortised cost.
Cash at bank
Cash at bank is carried in the balance sheet at nominal value.
Trade creditors
Trade payables are initially recognised at fair value and then are stated at amortised cost.
Bank and other borrowings
Interest bearing bank loans, bonds, subordinated debt and other loans are recognised initially at fair value. All borrowings are subsequently stated at amortised cost with the difference between initial net proceeds and redemption value recognised in the profit and loss account over the period to redemption.
Finance debtor
The finance debtor is classified as loans and receivables as defined in paragraph 9 of FRS 26, which are initially recognised at fair value and then are stated at amortised cost.
Accounting estimates and judgements
In applying the accounting policies detailed above, decisions sometimes have to be made as to the likely outcome of future events. Those judgements and estimates are based on historical experience and assumptions that the Directors believe reasonable in the circumstances. The Directors consider the key judgements and estimates made in preparing the financial statements to have been those relating to the calculation of the margin applied to costs in recognising revenue and the recognition of life cycle costs. These judgements and estimates are discussed in more detail above.
2 TURNOVER
Turnover represents the value of work done and excludes value added tax. All turnover is derived in the United Kingdom, and from the principal business segment which is the provision of non-clinical services to maintain the availability of hospital facilities.
3 OPERATING PROFIT
Operating profit is stated after charging:
Year Ended Year Ended
31.12.10 31.12.09
GBP'000 GBP'000
Depreciation of tangible fixed
assets 12 7
Auditor's remuneration
Fees for the audit of the
company's accounts 16 16
Other services relating to
taxation 2 7
All other services 1 3
Directors' emoluments
Directors' Fees - see note 1
below 25 35
Directors' Fees - see note 2 - 137
below Chairman's Fees 41 40
Directors' Emoluments - 13
- 13
1. These Directors' fees were paid to Innisfree Nominees Limited and Semperian PPP Investment Partners N(o) 2 Limited for provision of the non-executive Directors' services.
2. These Directors' fees were paid to Health Care Projects Limited for provision of the executive Directors' services (see Note 5). Included within this amount is GBP30,000 in the prior year in respect of compensation for loss of office payable to one Director. There were no executive Directors employed by Health Care Projects Limited in the year ended 31 December 2010.
4 INTEREST PAYABLE
Year ended Year Ended
31.12.10 31.12.09
GBP'000 GBP'000
Secured 3.607% Index Linked Bonds
2031 9,444 3,815
Amortisation of Bond Issue Costs 336 177
Unsecured Subordinated Debt 1,844 1,790
Interest Payable 11,624 5,782
Interest payable on the secured 3.607% Index Linked Bonds 2031 includes bond interest and bond indexation.
5 STAFF COSTS
Year ended Year ended
31.12.10 31.12.09
GBP'000 GBP'000
Wages and Salaries - 22
Social Security Costs - 6
- 28
From 1 February 2009 onwards all directors and staff employed directly by the Company transferred their contracts of employment and pensions rights (where applicable) to Health Care Projects Limited and are remunerated monthly by Health Care Projects Limited.
The average number of persons employed by the Company during the year was:
Year ended Year ended
31.12.10 31.12.09
Directors - 1
Staff - 1
- 2
6 TAXATION
Year ended Year ended
(a) The tax charge comprises: 31.12.10 31.12.09
Current tax: GBP'000 GBP'000
UK corporation tax on profits - -
Total current tax (note 6(b)) - -
Deferred tax: (note 14)
Origination and reversal of
timing differences Adjustments in 1,022 3,102
respect of prior years (203) -
Tax on profit on ordinary
activities 819 3,102
(b) Factors affecting the tax charge
for the year:
The tax assessed for the year is lower
than the standard rate of corporation Year ended Year ended
tax in the UK of 28% (2009: 28%). 31.12.10 31.12.09
The differences are explained below: GBP'000 GBP'000
Profit on ordinary activities
before taxation 4,285 10,326
Profit on ordinary activities
before taxation multiplied by
standard rate of corporation tax
in the UK of 28% (2009: 28%)
Effects of: 1,199 2,891
Taxable income credited to the
Finance debtor 753 665
Utilisation of tax losses (944) (2,316)
Other items Capital allowances 67 29
and short lease premium relief (1,075) (1,269)
Current tax charge for year - -
6 TAXATION (Continued)
(c) Factors that may affect future tax charges:
The corporation tax charge is expected to remain as GBPNil for several more years as there are estimated to be tax losses in the order of GBP38 million (2009: GBP41 million) as at 31 December 2010 which are available to carry forward against future profits (see note 14).
7 PROFIT AND LOSS ACCOUNT
GBP'000
At 1 January 2010 11,851
Profit for the year 3,466
Dividends paid (5,875)
At 31 December 2010 9,442
8 TANGIBLE FIXED ASSETS
Fixtures,
fittings
and equipment
Cost GBP'000
As at 1 January 2010 and 31
December 2010 45
Accumulated Depreciation
As at 1 January 2010 10
Provided in the Year 12
As at 31 December 2010
Book Value 22
As at 31 December 2010 23
As at 31 December 2009 35
9 DEBTORS : AMOUNTS FALLING DUE WITHIN ONE YEAR
31.12.10 31.12.09
GBP'000 GBP'000
Trade Debtors 1,035 1,202
Finance Debtor 2,879 2,514
Prepayments and Accrued Income 316 398
4,230 4,114
10 DEBTORS : AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
31.12.10 31.12.09
GBP'000 GBP'000
Finance Debtor 140,189 141,411
Other Debtors 400 400
140,589 141,811
Finance Debtor brought forward 143,925 147,214
Interest Receivable 9,747 9,846
Repayment in the year (10,604) (12,221)
Accrued/(deferred) service income - (914)
Finance Debtor carried forward 143,068 143,925
Finance Debtor analysed :
Due within one year 2,879 2,514
Due after more than one year 140,189 141,411
143,068 143,925
11 CASH AT BANK
31.12.10 31.12.09
GBP'000 GBP'000
Cash at bank 17,248 20,278
Cash at bank earns interest at floating rates based principally on short-term inter-bank rates.
12 CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR
31.12.10 31.12.09
GBP'000 GBP'000
Secured 3.607 % Index Linked Bonds
2031 5,363 8,388
Trade Creditors 1,635 1,505
Other Taxes and Social Security 1,460 1,242
Accruals and Deferred Income 2,874 3,878
11,332 15,013
13 CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
31.12.10 31.12.09
GBP'000 GBP'000
Subordinated Debt 14,914 14,914
Secured 3.607 % Index Linked
Bonds 2031 111,885 111,876
126,799 126,790
Index Linked Bond
31.12.10 31.12.09
GBP'000 GBP'000
Secured 3.607% Index Linked Bonds
2031 89,640 96,040
Add: Cumulative Indexation 30,617 27,570
120,257 123,610
Less: Unamortised Net Issue Costs (3,010) (3,346)
117,247 120,264
The bonds are repayable as follows:
Within one year 5,363 8,388
Within 1 to 2 years 5,805 5,363
Within 2 to 5 years 16,347 17,218
After more than 5 years 92,742 92,641
GBP137,400,000 secured index linked bonds 2031 were created on 16 August 1999 of which GBP128,900,000 were issued and sold at 99.992%. The bonds bear interest at 3.607% per annum of their principal amount outstanding. Interest is payable semi-annually in arrears on 28 March and 28 September. The amount of principal outstanding from time to time is subject to indexation in accordance with the terms of the Bond Trust Deed.
The Company retained GBP8,500,000 index linked bonds 2031 ("variation bonds") which it could sell, subject to certain restrictions in the Collateral Deed, to finance contingencies. On 30 November 2000 the Company sold GBP5,000,000 of the variation bonds to fund variations on the hospital construction contract.
The remaining GBP3,500,000 of unsold Variation Bonds were cancelled on 14 February 2009 by the Principal Paying Agent, as instructed by the issuer and in accordance with the Bond Trust Deed and the Paying Agency Agreement.
The bonds are repayable in instalments which commenced in March 2005 and should end in March 2031.
The Company's secured creditors have the benefit of first ranking charges granted by the Company over the whole of its investments, undertaking, property, assets, insurances and rights under certain contracts, both present and future, together with a first ranking charge over all of the ordinary shares of the Company and the Company's subordinated loan stock and those of its holding Company, Endeavour SCH Holdings Limited.
13 CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (Continued)
Unsecured Loan Stock 2032 (Subordinated debt)
The Company is a wholly beneficially owned subsidiary of Endeavour SCH Holdings Limited. The beneficial owners of the holding Company are Innisfree M & G PPP LP, through its nominee Innisfree Nominees Limited and Semperian PPP Investment Partners N(o) 2 Limited.
On 16 August 1999, the Company and Endeavour SCH Holdings Limited created GBP23,060,000 unsecured Loan Notes 2032, constituted under Deed Polls entered into on the same date. On 30 November 2000 a further GBP1,400,000 of Loan Notes were created to fund variations required on the construction contract.
Under the terms of an Equity Subscription Agreement dated 16 August 1999 as amended on 30 November 2000, the Shareholders of the holding Company agreed to subscribe for Loan Stock of Endeavour SCH Holdings Limited to the value of GBP24,460,000. Endeavour SCH Holdings Limited in turn agreed to subscribe for up to GBP24,460,000 of the Loan Stock of the Company. The proceeds of the stock issue are being used by the Company to finance its obligations under its contract with the Trust.
A proposal by the shareholders to change the payment profile of outstanding subordinated debt principal has been approved by FSA. The payments due during 2008 and 2009 have been added to the final principal payment, which is due in December 2032. The final principal payment becomes GBP14,914,349 which was the amount outstanding at 31 December 2010. Interest will be calculated on this outstanding principal, and will continue to be paid twice yearly as normal.
The Notes are repayable as follows:
31.12.10 31.12.09
GBP'000 GBP'000
After more than 5 years 14,914 14,914
Interest is payable on the Notes at a rate of 12% per annum with effect from 10 June 2003.
Where the Notes are redeemed after 30 September 2003, the price will be the higher of par less any amount already redeemed and that price, expressed as a percentage, at which the Gross Redemption Yield on the Notes would be equal to the Gross Redemption Yield on such other United Kingdom Government Stock as the Company shall determine to be appropriate based on the middle market price of the reference stock on the third dealing day prior to the proposed date of redemption.
13 CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (Continued)
The interest rate risk profile of the Company's financial liabilities is as follows:
Fixed rate Fixed rate
weighted weighted
average average
interest time for
Floating rate at which rate
Total rate Fixed rate 31 December is fixed
2010 2010 2010 2010 2010
GBP'000 GBP'000 GBP'000 % Years
Sterling 135,171 120,257 14,914 12.0 23
Fixed rate Fixed rate
weighted weighted
average average
interest time for
Floating rate at which rate
Total rate Fixed rate 31 December is fixed
2009 2009 2009 2009 2009
GBP'000 GBP'000 GBP'000 % Years
Sterling 138,524 123,610 14,914 12.0 24
As the 3.607% index linked secured bonds are partially linked with the Retail Price Index, the instrument has been categorised as floating rate debt in the above table. The underlying principal of the bonds is index linked and the 3.607% fixed interest element of the instrument is also index linked. Total liabilities shown above comprise the gross amount of the bonds in issue and the subordinated debt.
14 PROVISIONS FOR LIABILITIES
Deferred
Tax Life cycle Total
GBP'000 GBP'000 GBP'000
Provision at start of year 9,662 2,872 12,534
Amount provided for in year 819 3,746 4,565
Paid in the year - (2,632) (2,632)
Provision at end of year 10,481 3,986 14,467
It is anticipated that the life cycle provision will be utilised
within one year.
The Deferred Tax balance is analysed as follows:
2010 2009
GBP'000 GBP'000
Capitalised interest 7,502 8,070
Capital allowances 12,831 11,700
Short lease premium relief 486 446
Losses carried forward (10,338) (10,554)
Provision for deferred tax 10,481 9,662
15 FINANCIAL INSTRUMENTS
All of the company's financial liabilities are measured at amortised cost and all of the company's financial assets are classified as loans and receivables.
Financial Assets
The Company has one long term financial asset being the finance debtor (see note 10). This asset yields interest at a fixed rate of 7% per annum over the term of the lease, of which 23 years of the primary period are remaining.
Financial Risk Management Policies and Objectives
The Company's principal financial instruments comprise short term cash deposits, index linked bonds and a subordinated loan. The main purpose of these financial instruments is to ensure, via the terms of the financial instruments, that the profile of the debt service costs is tailored to match expected revenues arising from the Concession Agreement.
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 do so is restricted by covenants in its existing funding agreements.
Exposure to liquidity, credit and interest rate risks are in the normal course of the Company's business.
Liquidity Risk
Repayments of the index linked bonds and the subordinated loan are tailored to match expected revenue receivable under the terms of the Concession Agreement, so ensuring sufficient funds are available when repayments are due.
Credit Risk
Although the Trust is the only client of Endeavour SCH PLC, the Directors are satisfied that the Trust will be able to fulfil their collateral obligations under the Concession Agreement that are in turn underwritten by the Secretary of State for Health. As at the year end no amounts were past their due date. Cash and bank balances are held with financial institutions.
Interest Rate Risk
In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the period in which they mature:
Effective 1 Year 1-2 2-5
Interest Total or Less Years Years 5+ Years 5+ Years
2010 Rate GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash at
bank 0.29% 17,248 17,248 - - - -
Finance
debtor 7.0% 143,068 2,879 5,959 9,903 124,327 129,407
Unsecured
subordinated
loan 12.0% (14,914) - - - (14,914) (14,914)
Guaranteed
secured
bonds 3.6% (120,257) (5,363) (5,805) (16,347) (92,742) (93,793)
25,145 14,764 154 (6,444) 16,671 20,700
15 FINANCIAL INSTRUMENTS (Continued)
Effective 1 Year 1-2 2-5
Interest Total or Less Years Years 5+ Years
2009 Rate GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank 0.29% 20,278 20,278 - - -
Finance
debtor 7.0% 143,925 2,514 2,697 9,307 129,407
Unsecured
subordinated
loan 12.0% (14,914) - - - (14,914)
Guaranteed
secured
bonds 3.6% (123,610) (8,388) (5,363) (17,218) (92,641)
25,679 14,404 (2,666) (7,911) 21,852
Fair Values
The comparison of book and fair values of the Group's financial instruments at 31 December 2010 and 2009 is set out below. Where available, market values have been used to determine fair values. Where market values are not available, fair values have been calculated by discounting cash flows at prevailing interest rates. The disclosures below exclude short-term debtors and creditors where there is not considered to be a material difference between fair value and the carrying value.
31.12.10 31.12.10 31.12.09 31.12.09
Book Fair Book Fair
Value value Value Value
GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank 17,248 17,248 20,278 20,278
Finance Debtor 143,068 169,572 143,925 168,108
Subordinated
Loan Stock (14,914) (14,914) (14,914) (14,914)
Guaranteed
secured
bonds (120,257) (144,203) (123,610) (126,454)
25,145 27,703 25,679 47,018
Estimation of Fair Values
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the table.
Fair value of the finance debtor is calculated by discounting future cash flows at an appropriate discount rate. The discount rate has been calculated by reference to the long term Gilt Market Yields published by the Debt Management Office. A further 1% has been added to these yields to take account of the slightly higher risk profile that the finance debtor has compared to Government Gilts.
The discount rates that have been applied to the finance debtor at 31 December 2009 and 31 December 2010 are 5.33% and 5.34% respectively.
The fair value of the subordinated loan stock is not believed to be materially different to the carrying value of the liability.
The fair value of the index linked secured guaranteed bonds is the quoted price of the bonds.
15 FINANCIAL INSTRUMENTS (Continued)
Sensitivity Analysis
The majority of the Company's assets and liabilities are fixed rate. The Company's bank balances are subject to floating interest rates and a movement of plus or minus 1% in interest rates would have an impact of approximately GBP200,000 on interest receivable.
The Company's bond creditor is index linked. A movement of plus or minus 1% on the RPI would have an impact of approximately GBP1,560,000 on the indexation charge for the year. This risk is mitigated by the fact that the Company's contractual revenue streams are also index linked.
16 SHARE CAPITAL
31.12.10 31.12.09
GBP'000 GBP'000
Allotted, Called Up and Fully Paid
50,000 Ordinary Shares of GBP1 50 50
17 CAPITAL MANAGEMENT
The Company's objectives when managing capital are:
-- To safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and
-- To provide an adequate return to shareholders by minimising any potential performance deductions under the Concession Agreement
The Company's debt to capital ratio over the life of the project has been set in advance by the Concession Agreement and management cannot vary the terms of this agreement without share and bond holder approval.
18 RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
31.12.10 31.12.09
GBP'000 GBP'000
At 1 January 2010 11,901 8,238
Profit for the financial year after
taxation 3,466 7,224
Dividend (5,875) (3,561)
Net (decrease in) / addition to
Shareholders' Funds (2,409) 3,663
At 31 December 2010 9,492 11,901
19 CASH FLOW STATEMENT
a) Analysis of Net Debt
Other
Non
At Cash Cash At
01.01.10 Flow Changes 31.12.10
GBP'000 GBP'000 GBP'000 GBP'000
Cash at Bank 20,278 (3,030) - 17,248
Secured 3.607% Index
Linked Bonds 2031 (120,264) 8,389 (5,372) (117,247)
Subordinated
Debt (14,914) - - (14,914)
(114,900) 5,359 (5,372) (114,913)
b) Reconciliation of Net Cash Flow to Movement in Net Debt
31.12.10 31.12.09
Cash Flow Cash Flow
GBP'000 GBP'000
(Decrease) / Increase in Cash in
the Period (3,030) 643
Cash Outflow from Redemption of
Bond 8,389 8,898
Change in Net Debt Resulting from
Cash Flows 5,359 9,541
Changes in Net Debt Resulting
from Non Cash Transactions (5,372) 630
Movement in Net Debt in the
Period (13) 10,171
Other non-cash changes comprise provision for Bond indexation GBP5,035,600 (2009 (GBP807,000)) and amortisation of Bond issue costs GBP336,400 (2009: GBP177,000).
20 ULTIMATE HOLDING COMPANY AND CONTROLLING PARTY
The immediate holding Company is Endeavour SCH Holdings Limited, a Company registered in England and Wales, and the ultimate controlling party is Innisfree Nominees Limited. Copies of the Group accounts are available from Companies House, Crown Way, Cardiff CF14 3UZ.
21 RELATED PARTY TRANSACTIONS
The Company's parent Company is Endeavour SCH Holdings Limited which is owned jointly by Innisfree M&G PPP LP, a UK Limited Partnership acting through its nominee Innisfree Nominees Limited and Semperian PPP Investment Partners N(o) 2 Limited.
Under the terms of Shareholder and Management Agreements, Innisfree Nominees Limited and Semperian PPP Investment Partners N(o) 2 Limited provide the Company with its Directors. The value of fees charged in the year was GBP25,000 (2009: GBP35,000).
Innisfree Nominees Limited and Semperian PPP Investment Partners N(o) 2 Limited are parties to an Equity Subscription Agreement, details of which are given in note 13 of the financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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