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Name | Symbol | Market | Type |
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Meadow.fin A1 | LSE:37QC | London | Bond |
Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
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0.00 | 0.00% | 123.552 | 0 | 01:00:00 |
TIDM37QC
RNS Number : 9830G
Meadowhall Finance PLC
29 July 2021
The Annual Report and Financial Statements for the year ended 31 March 2021, attached below in accordance with DTR 6.3.5, has been submitted to the Financial Conduct Authority through the National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The Annual Report and Financial Statements are also available at: https://www.britishland.com/investors/strategic-partnerships/meadowhall-finance-plc
Meadowhall Finance PLC
Annual Report and Financial Statements
Year ended 31 March 2021
Company number: 05987141
Strategic Report for the Year Ended 31 March 2021
The directors present their Strategic Report for the year ended 31 March 2021.
Business review and principal activities
Meadowhall Finance PLC ("the company") is a wholly owned subsidiary of Meadowhall Limited Partnership, which itself is indirectly owned by MSC Property Intermediate Holdings Limited. MSC Property Intermediate Holdings Limited and its subsidiaries ("the group") operate as a joint venture between The British Land Company PLC and NBIM Victoria Partners LP.
The company's principal activity is to provide funding to fellow subsidiaries within the group.
As shown in the company's Profit and Loss Account on page 10, the company's profit on ordinary activities before taxation is GBP3,279 compared to a profit on ordinary activities before taxation of GBP3,367 in the prior year.
Dividends of GBPnil (2020: GBPnil) were paid in the year.
The Balance Sheet on page 13 shows that the company's financial position at the year end has, in net liability terms, decreased compared with the prior year. This is mainly due to movements in the valuation of interest rate swaps reflecting the increase in market interest rates since the beginning of the year.
Details of significant events since the balance sheet date, if any, are contained in note 15.
Key performance indicators
The directors measure how the group is delivering its strategy through the key performance indicators.
The directors consider the primary measure of performance of the group to be turnover and net asset value. The performance of the group, which includes the company, is discussed in the group's annual report which can be obtained as per the details in note 15.
The expected future developments of the company are determined by the strategy of the group. There are no future developments outside of the company's operations planned.
Principal risks and uncertainties
This company is part of a large property investment group. As such, the fundamental underlying risks for this company are those of the property group as discussed below.
The group generates returns to shareholders through long-term investment decisions requiring the evaluation of opportunities arising in the following areas:
-- demand for space from occupiers against available supply; -- identification and execution of investment and development strategies which are value enhancing; -- availability of financing or refinancing at an acceptable cost; -- economic cycles, including their impact on tenant covenant quality, interest rates, inflation and property values; -- legislative changes, including planning consents and taxation; -- engagement of development contractors with strong covenants; -- key staff changes; and -- environmental and health and safety policies.
Principal risks and uncertainties (continued)
These opportunities also represent risks, the most significant being change to the value of the property portfolio. This risk has high visibility to directors and is considered and managed on a continuous basis. Directors use their knowledge and experience to knowingly accept a measured degree of market risk.
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. In order to manage this risk, management regularly monitors all amounts that are owed to the company to ensure that amounts are paid in full and on time.
Liquidity risk is the risk that the entity will encounter difficulty in raising funds to meet commitments associated with financial liabilities. This risk is managed through day to day monitoring of future cash flow requirements to ensure that the company has enough resources to repay all future amounts outstanding.
The company's activities expose it primarily to interest rate risk. The company uses interest rate swap contracts to hedge these exposures. The company does not use derivative financial instruments for speculative purposes.
The company finances its operations through public debt issues. The company borrows in Sterling at both fixed and floating rates of interest, using interest rate derivatives to hedge the interest rate risk on variable rate debt.
The company holds one derivative as at 31 March 2021 (2020: one) to fix the interest rates on external debt at approximately 4.65% (2020: 4.65%). The fair value of interest rate derivatives at the year end is a liability of GBP14.4m (2020: GBP17.2m liability) and has been accounted for using hedge accounting through the Statement of Comprehensive Income, with the ineffective portion recognised in the profit and loss account.
Approved by the Board on 28 July 2021 and signed on its behalf by:
H Shah
Director
Directors' Report for the Year Ended 31 March 2021
The directors present their report and the audited financial statements for the year ended 31 March 2021.
Directors of the company
The directors, who held office during the year, and up to the date of signing the financial statements, were as follows:
H Shah
J Brookes
J Patel
P Case
R Peel
Directors' responsibilities statement
The directors acknowledge their responsibilities 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 prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 "Reduced Disclosure Framework", 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 apply them consistently; -- state whether applicable United Kingdom Accounting Standards, comprising FRS 101, have been followed, subject to any material departures disclosed and explained in the financial statements; -- make judgements and accounting estimates that are reasonable and prudent; 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.
The directors 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 of the ultimate parent company are responsible for the maintenance and integrity of the ultimate parent company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Environment
The company recognises the importance of its environmental responsibilities, monitors its impact on the environment; and designs and implements policies to reduce any damage that might be caused by the company's activities. The company operates in accordance with best practice policies and initiatives designed to minimise the company's impact on the environment including safe disposal of manufacturing waste, recycling and reducing energy consumption.
Going concern
The Directors have reviewed the company's forecast working capital and cash flow requirements in light of the ongoing impact that the COVID-19 pandemic has had on the economy. In addition to making enquiries and examining areas which could give risk to financial exposure.
At 31 March 2021 the company was in a net liability position of GBP11,156,252 (2020: GBP13,533,446) mainly due to the result of market rates being below the fixed rate payable on the company's interest rate swap. Within the going concern period the company is required to repay principal amounts of GBP34,845,925 on the secured bonds and receive GBP34,987,426 on the term loans from Meadowhall Limited Partnership (the borrower). In the instance of shortfall on repayment of term loan by the borrower due to lower rent received from tenants, the Company has access to an undrawn Liquidity Facility of GBP75m which will be available for the scheduled life of the bonds to 2032 to meet certain shortfalls in debt service of the Issuer, including bond interest and certain bond amortisation amounts. The company also has the ability to defer other debt service amounts in accordance with the securitisation documents.
As a result of the above, Meadowhall Finance PLC expects to have sufficient resources to meet the debt service requirements of the company despite the current economic climate. Therefore, the directors have a reasonable expectation that the company has adequate resources to continue its operations for at least twelve months after the signing of these financial statements and as a result they continue to adopt the going concern basis in preparing the accounts.
Subsequent Events
Details of significant events since the Balance Sheet date, if any, are contained in note 14.
Disclosure of information to the auditors
Each director has taken steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the company's auditors are aware of that information. The directors confirm that there is no relevant information that they know of and of which they know the auditors are unaware.
Reappointment of auditors
The auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in office and a resolution concerning their re-appointment will be proposed at the next Board Meeting.
Approved by the Board on 28 July 2021 and signed on its behalf by:
H Shah
Director
Independent auditors' report to the members of Meadowhall Finance PLC
Report on the audit of the financial statements
Opinion
In our opinion, Meadowhall Finance PLC's financial statements:
-- give a true and fair view of the state of the company's affairs as at 31 March 2021 and of its profit for the year then ended;
-- have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 "Reduced Disclosure Framework", and applicable law); and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Financial Statements (the "Annual Report"), which comprise: the Balance Sheet as at 31 March 2021; the Profit and Loss Account, the Statement of Comprehensive Income and the Statement of Changes in Equity for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the directors.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC's Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC's Ethical Standard were not provided.
We have provided no non-audit services to the company in the period under audit.
Our audit approach
Overview
Audit scope
-- We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole. In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
Key audit matters
-- Covid-19
Materiality
-- Overall materiality: GBP5,600,000 (2020: GBP5,900,000) based on 1% of total assets. -- Performance materiality: GBP4,200,000.
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors' professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The key audit matters below are consistent with last year.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the company, the accounting processes and controls, and the industry in which it operates.
The company's principal activity is to provide funding to fellow subsidiaries within the group. The scoping performed has ensured sufficient coverage and appropriate audit evidence for our opinion on the company financial statements as a whole.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall company GBP5,600,000 (2020: GBP5,900,000). materiality How we determined 1% of total assets it ------------------------------------------------------- Rationale for We believe that total assets are the primary measure benchmark applied used by the shareholders in assessing the performance of the entity, and is a generally accepted auditing benchmark. -------------------------------------------------------
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% of overall materiality, amounting to GBP4,200,000 for the company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the directors that we would report to them misstatements identified during our audit above 282,000 (2020: 297,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors' assessment of the company's ability to continue to adopt the going concern basis of accounting included:
-- Corroborated key assumptions (e.g. liquidity forecasts and financing arrangements) to underlying documentation and ensured this was consistent with our audit work in these areas;
-- Understood and assessed the appropriateness of the key assumptions used both in the base case and in the severe but plausible downside scenario, including assessing whether we considered the downside sensitivities to be appropriately severe;
-- Tested the integrity of the underlying formulas and calculations within the going concern and cash flow models;
-- Considered the appropriateness of the mitigating actions available to management in the event of the downside scenario materialising. Specifically, we focused on whether these actions are within the company's control and are achievable; and
-- Reviewed the disclosures provided relating to the going concern basis of preparation and found that these provided an
explanation of the directors' assessment that was consistent with the evidence we obtained.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the company's ability to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors' report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and Directors' Report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described below.
Strategic report and Directors' Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors' Report for the year ended 31 March 2021 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic report and Directors' Report.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors' responsibilities statement, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditors' responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the company and industry, we identified that the principal risks of non-compliance with laws and regulations related to the Companies Act 2006 and the Listing Rules, and we considered the extent to which non- compliance might have a material effect on the financial statements. We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to increase interest receivable or reduce interest payable. Audit procedures performed by the engagement team included:
-- Discussions with management and internal audit, including consideration of known or suspected instances of non- compliance with laws and regulations and fraud, and review of the reports made by management and internal audit;
-- Understanding of management's internal controls designed to prevent and detect irregularities, risk-based monitoring of customer processes;
-- Assessment of matters reported on the company's whistleblowing helpline and the results of management's investigation of such matters;
-- Reviewing the company's litigation register in so far as it related to non-compliance with laws and regulations and fraud; and
-- Reviewing relevant meeting minutes.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors' report.
Use of this report
This report, including the opinions, has been prepared for and only for the company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
-- we have not obtained all the information and explanations we require for our audit; or
-- adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or
-- certain disclosures of directors' remuneration specified by law are not made; or -- the financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the directors, we were appointed by the directors on 15 March 2018 to audit the financial statements for the year ended 31 March 2018 and subsequent financial periods. The period of total uninterrupted engagement is four years, covering the years ended 31 March 2018 to 31 March 2021.
Sandra Dowling (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London
28 July 2021
Profit and Loss Account for the Year Ended 31 March 2021
2021 2020 Note GBP GBP Interest received and similar income 3 28,997,405 30,324,389 Interest paid and similar expenses 4 (28,994,126) (30,321,022) ------------ ------------ Profit on ordinary activities before taxation 3,279 3,367 Taxation 7 (623) (640) ------------ ------------ Profit for the year 2,656 2,727 ============ ============
Results were derived from continuing operations within the United Kingdom.
Statement of Comprehensive Income for the Year Ended 31 March 2021
2021 2020 Note GBP GBP Profit for the year 2,656 2,727 --------- ----------- Items that may be reclassified subsequently to profit or loss Gain / (loss) on cash flow hedges (net) 10 2,919,656 (1,728,037) Tax relating to components of other comprehensive income / (expense) 11 (545,118) 639,861 --------- ----------- 2,374,538 (1,088,176) --------- ----------- Total comprehensive income / (expense) for the year 2,377,194 (1,085,449) ========= ===========
Balance Sheet as at 31 March 2021
31 March 31 March 2021 2020 Note GBP GBP Current assets Debtors due within one year 8 41,062,365 39,107,905 Debtors due after more than one year 8 522,322,266 555,187,011 Cash at bank and in hand 17 41,830 ------------- ------------- 563,384,648 594,336,746 Creditors due within one year 9 (40,909,339) (38,726,111) ------------- ------------- Total assets less current liabilities 522,475,309 555,610,635 Creditors due after more than one year 10 (533,631,561) (569,144,081) ------------- ------------- Net liabilities (11,156,252) (13,533,446) ============= ============= Capital and reserves Called up share capital 12 12,502 12,502 Cash flow hedging reserve (10,678,043) (13,052,581) Profit and loss account (490,711) (493,367) ------------- ------------- Total shareholders' deficit (11,156,252) (13,533,446) ============= =============
Approved by the Board on 28 July 2021 and signed on its behalf by:
H Shah
Director
Statement of Changes in Equity for the Year Ended 31 March 2021
Cash flow Profit and Share capital hedging reserve loss account Total GBP GBP GBP GBP Balance at 1 April 2019 12,502 (11,964,405) (496,094) (12,447,997) Profit for the year - - 2,727 2,727 Gain / (loss) on cash flow hedges (net) - (1,728,037) - (1,728,037) Tax relating to components of other comprehensive expense - 639,861 - 639,861 ------------- ---------------- ------------- ------------ Total comprehensive expense for the year - (1,088,176) 2,727 (1,085,449) ------------- ---------------- ------------- ------------ Balance at 31 March 2020 12,502 (13,052,581) (493,367) (13,533,446) ============= ================ ============= ============ Balance at 1 April 2020 12,502 (13,052,581) (493,367) (13,533,446) Profit for the year - - 2,656 2,656 Gain / (loss) on cash flow hedges (net) - 2,919,656 - 2,919,656 Tax relating to components of other comprehensive income - (545,118) - (545,118) ------ ------------ --------- ------------ Total comprehensive income for the year - 2,374,538 2,656 2,377,194 ------ ------------ --------- ------------ Balance at 31 March 2021 12,502 (10,678,043) (490,711) (11,156,252) ====== ============ ========= ============
Meadowhall Finance PLC
Notes to the Financial Statements for the Year Ended 31 March 2021
1 General information
The company is a public company limited by share capital, incorporated and domiciled in England, United Kingdom.
The address of its registered office is:
York House
45 Seymour Street
London
W1H 7LX
2 Accounting policies
Summary of significant accounting policies and key accounting estimates
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework ("FRS 101").
The financial statements are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. Instances in which advantage of the FRS 101 disclosure exemptions have been taken are set out below.
The financial statements have been prepared under the historical cost convention, as modified to include the revaluation of derivatives. Historical cost is generally based on the fair value of the consideration given in exchange for the assets.
Summary of disclosure exemptions
The company has taken advantage of the following disclosure exemptions under FRS 101:
(a) The requirements of IAS 1 to provide a Balance Sheet at the beginning of the year in the event of a prior year adjustment; (b) The requirements of IAS 1 to provide a Statement of Cash flows for the year; (c) The requirements of IAS 1 to provide a statement of compliance with IFRS; (d) The requirements of IAS 1 to disclose information on the management of capital; (e) The requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to disclose new IFRS's that have been issued but are not yet effective; (f) The requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member; (g) The requirements of paragraph 17 of IAS 24 Related Party Disclosures to disclose key management personnel compensation; (h) The requirements of IFRS 7 to disclose financial instruments; and (i) The requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement to disclose information of fair value valuation techniques and inputs. 2 Accounting policies (continued)
Disclosure exemptions for subsidiaries are permitted where the relevant disclosure requirements are met in the consolidated financial statements. Where required, equivalent disclosures are given in the group financial statements of MSC Property Intermediate Holdings Limited. The group financial statements of MSC Property Intermediate Holdings Limited are available to the public and can be obtained as set out in note 15.
Going concern
The Directors have reviewed the company's forecast working capital and cash flow requirements in light of the ongoing impact that the COVID-19 pandemic has had on the economy. In addition to making enquiries and examining areas which could give risk to financial exposure.
At 31 March 2021 the company was in a net liability position of GBP11,156,252 (2020: GBP13,533,446) mainly due to the result of market rates being below the fixed rate payable on the company's interest rate swap. Within the going concern period the company is required to repay principal amounts of GBP34,845,925 on the secured bonds and receive GBP34,987,426 on the term loans from Meadowhall Limited Partnership (the borrower). In the instance of shortfall on repayment of term loan by the borrower due to lower rent received from tenants, the Company has access to an undrawn Liquidity Facility of GBP75m which will be available for the scheduled life of the bonds to 2032 to meet certain shortfalls in debt service of the Issuer, including bond interest and certain bond amortisation amounts. The company also has the ability to defer other debt service amounts in accordance with the securitisation documents.
As a result of the above, Meadowhall Finance PLC expects to have sufficient resources to meet the debt service requirements of the company despite the current economic climate. Therefore, the directors have a reasonable expectation that the company has adequate resources to continue its operations for at least twelve months after the signing of these financial statements and as a result they continue to adopt the going concern basis in preparing the accounts.
Interest payable and receivable policy
Interest payable and receivable is recognised as incurred under the accruals concept. Interest payable includes financing charges which are spread over the period to redemption, using the effective interest method. Commitment fees on non-utilised facilities are also included within interest payable.
Taxation
Current tax
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Current tax is based on taxable profit for the year and is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are not taxable (or tax deductible).
Deferred tax
Deferred tax is provided on items that may become taxable at a later date, on the difference between the balance sheet value and tax base value, on an undiscounted basis. The company recognises deferred tax assets on derivative revaluations to the extent that future matching taxable profits are expected to arise.
2 Accounting policies (continued)
Financial assets and liabilities
Trade debtors and creditors are initially recognised at fair value and subsequently measured at amortised cost and discounted as appropriate. On initial recognition the Group calculates the expected credit loss for debtors based on lifetime expected credit losses under the IFRS 9 simplified approach.
Loans and receivables classified as amortised cost are measured using the effective interest method, less any impairment. Interest is recognised by applying the effective interest rate.
Debt instruments are stated at their net proceeds on issue. Finance charges including premia payable on settlement or redemption and direct issue costs are spread over the period to redemption, using the effective interest method. Exceptional finance charges incurred due to early redemption (including premia) are recognised in the Consolidated Income Statement when they occur.
As defined by IFRS 9, cash flow and fair value hedges are initially recognised at fair value at the date the derivative contracts are entered into, and subsequently remeasured at fair value. Changes in the fair value of derivatives that are designated and qualify as effective cash flow hedges are recognised directly through other comprehensive income as a movement in the hedging and translation reserve. Changes in the fair value of derivatives that are designated and qualify as effective fair value hedges are recorded in the Consolidated Income Statement, along with any changes in the fair value of the hedged item that is attributable to the hedged risk. Any ineffective portion of all derivatives is recognised in the Consolidated Income Statement. Changes in the fair value of derivatives that are not in a designated hedging relationship under IFRS 9 are recorded directly in the Consolidated Income Statement. These derivatives are carried at fair value on the balance sheet.
Cash equivalents are limited to instruments with a maturity of less than three months.
3 Interest received and similar income 2021 2020 GBP GBP Interest received on amounts owed by group companies 28,997,405 30,324,389 ------------------ ------------------ 28,997,405 30,324,389 ================== ================== 4 Interest paid and similar expenses 2021 2020 GBP GBP Bonds and related facilities 27,081,837 28,573,963 Interest paid on cashflow hedge 1,912,289 1,747,059 ------------------ ------------------ 28,994,126 30,321,022 ================== ================== 5 Auditors' remuneration
A notional charge of GBP14,700 (2020: GBP14,700) is deemed payable to PricewaterhouseCoopers LLP in respect of the audit of the financial statements for the year ended 31 March 2021. Actual amounts payable to PricewaterhouseCoopers LLP are paid at group level by MSC Property Intermediate Holdings Limited.
No non-audit fees (2020 : GBPnil) were paid to PricewaterhouseCoopers LLP.
6 Staff costs
No director (2020: nil) received any remuneration for services to the company in either year. The remuneration of the directors was borne by another company, for which no apportionment or recharges were made.
Average number of employees, excluding directors, of the company during the year was nil (2020: nil).
7 Taxation 2021 2020 GBP GBP Current taxation UK corporation tax 623 640 ---- ---- Tax charge in the profit and loss account 623 640 ==== ==== 2021 2020 GBP GBP Tax reconciliation Profit on ordinary activities before taxation 3,279 3,367 ----- ----- Tax on profit on ordinary activities at UK corporation tax rate of 19% (2020: 19%) 623 640 Effects of: Total tax charge 623 640 ===== =====
In the Spring Budget 2021, the Government announced that from 1 April 2023 the corporation tax rate will increase to 25%. At the balance sheet date, the proposal to increase the rate to 25% had not been substantively enacted, substantive enactment occurred on 24 May 2021. Any material impact on deferred tax has been discussed in note 12.
8 Debtors 31 March 31 March 2021 2020 GBP GBP Debtors due within one year Amounts due from related parties 19,503 12,185 Loans to related parties 34,987,426 32,763,480 Accrued income 6,055,436 6,332,240 ----------- ----------- 41,062,365 39,107,905 =========== =========== 8 Debtors (continued) 31 March 31 March 2021 2020 GBP GBP Debtors due within more than one year Deferred tax assets - see note 11 2,728,763 3,273,881 Amounts owed by group companies - Long term loans 519,593,503 551,913,130 ----------- ----------- 522,322,266 555,187,011 =========== =========== 9 Creditors due within one year 31 March 31 March 2021 2020 GBP GBP Accrued expenses 6,052,189 5,959,348 Amounts due to related parties 1,825 1,825 Social security and other taxes 8,777 1,458 Corporation tax liability 623 - Secured bonds 34,845,925 32,763,480 ------------------------- ------------------------- 40,909,339 38,726,111 ========================= ========================= 10 Creditors due after more than one year 31 March 31 March 2021 2020 GBP GBP Secured bonds due within one to two years 37,301,720 32,643,480 Secured bonds due within two to five years 109,631,640 112,502,960 Secured bonds due after five years 372,336,290 406,766,690 Interest rate derivative liability 14,361,911 17,230,951 ------------------------- -------------------------
533,631,561 569,144,081 ========================= ========================= 10 Creditors due after more than one year (continued) 31 March 31 March 2021 2020 GBP GBP Borrowings repayment analysis Repayments due: Within one year 34,845,925 32,763,480 Within one to two years 37,301,720 32,643,480 Within two to five years 109,631,640 112,502,960 ------------------------- ------------------------- 181,779,285 177,909,920 After five years 372,336,290 406,766,690 ------------------------- ------------------------- Total borrowings 554,115,575 584,676,610 Fair value of interest rate derivatives 14,361,911 17,230,951 ------------------------- ------------------------- Net debt 568,477,486 601,907,561 ========================= ========================= 31 March 31 March 2021 2020 GBP GBP Secured bonds on the assets of the Meadowhall Limited Partnership Class A1 4.986% Bonds due 2037 393,259,680 420,760,560 Class A2 Floating Rate Bonds due 2037 42,780,000 44,460,000 Class B 4.988% Bonds due 2037 118,075,895 119,456,050 ------------ ----------- Total borrowings 554,115,575 584,676,610 Fair value of interest rate derivatives 14,361,911 17,230,951 ------------ ----------- Total secured borrowings 568,477,486 601,907,561 ============ ===========
The GBP43m (2020: GBP44m) floating rate bonds are fully hedged by a swap to 2032. At 31 March 2021, taking into account the effect of derivatives, 100% of the bonds were fixed (2020: 100%) until expected maturity. The bonds amortise from 2007 to 2032, and are secured on the properties of group valued at GBP736m (2020: GBP1,154m). The weighted average interest rate of the bonds is 5.00% (2020: 5.00%). The weighted average maturity of the bonds is 7.4 years (2020: 8.0 years).
The secured bonds as detailed in this note are issued by Meadowhall Finance PLC ('Issuer') and the proceeds are on-lent to Meadowhall Limited Partnership ('Borrower') under the Issuer/Borrower Loan Agreement. Under this agreement Meadowhall Limited Partnership will grant security over its beneficial interest in Meadowhall Shopping Centre ('Mortgaged Property') and selected other interests and assets.
10 Creditors due after more than one year (continued)
Following the Consent Solicitation Process and Notices announced by Meadowhall Finance PLC on 17 June 2020, the Extraordinary Resolutions set out in each such Notice was duly held and passed by the holders of the relevant Classes of the A1, A2 and B Bonds on 9 July 2020. As a result certain covenant provisions in relation to Meadowhall Limited Partnership (the Borrower) are modified from 9 July 2020 to (and including) the Interest Payment Date falling in October 2021.
At 31 March 2021, the company was financed by GBP554.1m bonds (2020: GBP584.7m).
Except as detailed below, the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements are approximately equal to their fair values.
31 March 31 March 2021 2020 GBPm GBPm Bonds fair value 623 702 ======== ========
Comparison of fair values and book values and fair value hierarchy
The table below provides a comparison of fair value and book value along with the classification per the fair value hierarchy. The different levels are defined:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Fair value Book value Fair value Book value 31 March 31 March 31 March 31 March 2021 2021 2020 2020 Level GBP m GBP m GBP m GBP m Secured bonds 2 623 554 702 585 Interest rate derivative liability 2 14 14 17 17 ---------- ---------- ---------- ---------- 637 568 719 602 ========== ========== ========== ==========
The fair values of the bonds have been established by obtaining quoted market prices from brokers. The derivatives have been valued by calculating the present value of future cash flows, using appropriate market discount rates, by an independent treasury advisor.
The Class A1 and B Loan notes expose the entity to fair value interest rate risk while the Class A2 Loan notes expose the company to cash flow interest rate risk.
The ineffectiveness recognised in the income statement on cash flow hedges in the year ended 31 March 2021 was GBPnil (2020: GBPnil). The table below summarises variable rate debt hedged at 31 March 2021.
31 March 31 March 2021 2020 GBP GBP Outstanding after one year 41,220,000 42,780,000 Outstanding after two years 40,500,000 41,220,000 Outstanding after five years 39,060,000 39,060,000 10 Creditors due after more than one year (continued)
Hedge accounting
The company uses interest rate swaps to hedge exposure to the variability in cash flows on floating rate debt. At 31 March 2021, the fair value of these derivatives, which have been designated cash flow hedges under lFRS 9, is a liability of GBP14.4m (2020: GBP17.2m liability). The valuation movement reflects the decrease in market interest rates since the beginning of the year.
The derivatives have been valued by calculating the net present value of future cash flows, using appropriate market discount rates, by an independent treasury advisor. The effective portion of changes in fair value of the designated hedging instrument is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the profit and loss. Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to the profit and loss in the periods in which the hedged item affects profit or loss or when the hedging relationship ends.
2021 2020 Movement Reconciliation to gain / (loss) on cash GBP GBP GBP flow hedges (net) Fair value of interest rate derivatives (gross) (14,361,911) (17,230,951) 2,869,040 Less: Derivative interest posted directly to income statement 422,887 372,271 50,616 Gain / (loss) on cash flow hedges (net) (13,939,024) (16,858,680) 2,919,656 2020 2019 Movement Reconciliation to gain / (loss) on cash GBP GBP GBP flow hedges (net) Fair value of interest rate derivatives (gross) (17,230,951) (15,494,231) (1,736,720) Less: Derivative interest posted directly to income statement 372,271 363,588 8,683 Gain / (loss) on cash flow hedges (net) (16,858,680) (15,130,643) (1,728,037)
The Treasury Function
The company finances its operations through public debt issues. The company borrows in Sterling at both fixed and floating rates of interest, using interest rate derivatives to hedge these borrowings where appropriate.
Risk Management
Capital risk management:
The company finances its operations through public debt issues to ensure that sufficient competitively priced finance is available to support the property strategy of the MSC Property Intermediate Holdings Limited group.
The approach adopted has been to engage in debt financing with long term maturity dates and as such the bonds issued are due in 2037, but are expected to be repaid in 2032. Including debt amortisation 67.6% (2020: 69.6%) of the total borrowings are due for payment after 5 years. There are no immediate debt refinancing requirements.
The company maintains a revolving liquidity facility which provides financial liquidity. This facility is only available for the requirements of the Meadowhall securitisation. At 31 March 2021 this facility was GBP75.0m (GBP75.0m undrawn) (2020: GBP75.0m (GBP75.0m undrawn)).
Details of bond covenants are authorised in the bonds Offering Circular, accessible via:
https://www.britishland.com/investors/debt/strategic-partnerships/meadowhall-financing-plc
Credit risk:
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The carrying amount of financial assets recorded in the financial statements represents the company's maximum exposure to credit risk without taking account of the value of any collateral obtained.
10 Creditors due after more than one year (continued)
Cash and deposits at 31 March 2021 amounted to GBP17 (2020: GBP41,830) and are placed with European Financial institutions with A or better credit ratings. At 31 March 2021, prior to taking account of any offset arrangements, the largest combined credit exposure to a single counterparty arising from money market deposits and interest rate swaps was GBPnil (2020: GBPnil). This represents 0% (2020: 0%) of gross assets.
The company's principal credit risk relates to an intra-group loan to Meadowhall Limited Partnership. At 31 March 2021 this loan stood at GBP554.1m (2020: GBP584.7m). The purpose of this loan is to provide funding to fellow subsidiaries of the MSC Property Intermediate Holdings Limited group.
At 31 March 2021, the fair value of all interest rate derivatives which had a positive value was GBPnil (2020: GBPnil).
In order to manage this risk, management regularly monitors all amounts that are owed to the company to ensure that amounts are paid in full and on time.
Liquidity risk:
Liquidity risk is the risk that the entity will encounter difficulty in raising funds to meet commitments associated with financial liabilities. This risk is managed through day to day monitoring of future cash flow requirements to ensure that the company has enough resources to repay all future amounts outstanding.
Interest rate risk:
The company's activities expose it primarily to interest rate risk. The group uses interest rate swap contracts to hedge these exposures. The group does not use derivative financial instruments for speculative purposes.
11 Deferred tax asset 2021 2020 GBP GBP 1 April 3,273,881 2,634,020 Credited to hedging and translation reserve (545,118) 639,861 --------- --------- 31 March 2,728,763 3,273,881 ========= =========
The deferred tax balance arises on the fair value gain or loss on the revaluation of interest rate derivatives as described in note 11.
In the Spring Budget 2021, the Government announced that from 1 April 2023 the corporation tax rate will increase to 25%. At the balance sheet date, the proposal to increase the rate to 25% had not been substantively enacted, substantive enactment occurred on 24 May 2021, therefore, its effects are not included in these financial statements. However, it is likely that the overall effect of the change, had it been substantively enacted by the balance sheet date, would be to increase the tax gain recorded in the Statement of change in Equity for the period by GBP861,715, to increase the deferred tax asset by GBP861,715.
12 Share capital
Allotted, called up and fully paid shares
31 March 31 March 2021 2020 No. GBP No. GBP Ordinary shares of GBP1 each 2 2 2 2 Ordinary shares part paid of GBP0.25 each 49,998 12,500 49,998 12,500 50,000 12,502 50,000 12,502 ====== ====== ====== ====== 13 Contingent liabilities
The company is jointly and severally liable with MSC (Cash Management) Limited and fellow subsidiaries for all monies falling due under the group VAT registration.
14 Subsequent events
There have been no significant events since the year end.
15 Parent and ultimate parent undertaking
The immediate controlling party is Meadowhall Limited Partnership.
The ultimate holding company is MSC Property Intermediate Holdings Limited, a joint venture between The British Land Company PLC and NBIM Victoria Partners LP.
MSC Property Intermediate Holdings Limited is the smallest and largest group for which group accounts are available and which include the company. The accounts of MSC Property Intermediate Holdings Limited are available on request from British Land, York House, 45 Seymour Street, London, W1H 7LX.
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July 29, 2021 12:25 ET (16:25 GMT)
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