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| Name | Symbol | Market | Type |
|---|---|---|---|
| Roth.c.f.nts14 | LSE:68WN | London | Bond |
| Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 72.50 | 0 | 00:00:00 |
From Dec 2019 to Dec 2024
TIDM68WN
RNS Number : 6435X
Rothschild & Co Continuation Fin
30 April 2019
Rothschild & Co Continuation Finance PLC (formerly Rothschilds Continuation Finance PLC)
Report of the Directors and Financial Statements
for the year ended 31 December 2018
Strategic Report
Business Model and Strategic Objectives
Rothschild & Co Continuation Finance PLC ("the Company") is a wholly-owned subsidiary of N M Rothschild & Sons Limited ("NMR") and was incorporated on 30 August 2000 to operate as a finance vehicle for the benefit of NMR and its subsidiaries.
The principal activity of the Company is the raising of finance for the purpose of lending it to NMR and other companies in the Rothschild & Co Group ("the Group"). The only current debt securities in issue are the perpetual subordinated notes guaranteed by NMR.
In 2017, the Company changed its financial year end from 31 March to 31 December. This set of financial statements is the first full year since this change and consequently, the comparative figures for the Company's income statement, statement of comprehensive income, statement of changes in equity, cash flow statement and related notes are for the 9 months from 1 April 2017 to 31 December 2017.
Business Update and Key Performance Indicators
As mentioned above, the Company operates as a finance vehicle which issues debt and lends it onto other Rothschild & Co Group companies on substantially the same terms. The only debt currently in issue is perpetual subordinated notes. Given the nature of this debt and the related loans to its parent undertaking, the Directors consider that accrual accounting, as per prior years, best reflects the purpose of the Company as a pass through financing vehicle and to match the EUR150m loan asset and debt securities in issue. On this basis, the loan asset and debt securities would be matched on the balance sheet at GBP134m to reflect the real asset and liability position of the Company.
However, the loan to the parent company does not pass the "solely payments of principal and interest" test under IFRS 9 (which came into force from 1 January 2018) due to technical terms in the loan documentation which, in accordance with IFRS 9, override the Directors' view of the business. The Company has therefore been required to report the loan asset at fair value on the balance sheet, which resulted in an opening reserves loss of GBP13.7m and a loss for the year of GBP21.2m (both before tax). Given this mandatory treatment, the Directors have elected to fair value the liabilities which result in offsetting gains of GBP13.9m on transition to IFRS 9 and of GBP21.2m in the income statement for the year. The fair values of both loan asset and debt securities have been based on a review of available quotes and any third party transactions for the debt securities. The value of the loan asset is marginally higher given the 1 b.p. higher margin than the debt securities.
Provision for deferred tax has been made on the fair value movements, albeit that under various tax regulations both the loans and debt securities will continue to be taxed on an amortised cost basis. This resulted in a net deferred tax liability of GBP34,190.
Overall, the impact of the IFRS 9 mandatory and elected changes, along with the normal interest margin, is that reserves have increased by GBP177,379 with a profit after tax for the year of GBP11,606.
Principal Risks and Uncertainties
The principal risks of the Company are credit risk, liquidity risk, market risk and operational risk. The Company follows the risk management policies of the parent undertaking, NMR.
The Company's principal risk is credit exposure to NMR, as the notes issued by the Company have been guaranteed by, and funds have been on-lent to, NMR. The Company's ability to meet its obligations in respect of notes issued by it is therefore reliant on NMR's ability to make payments to the Company. Currently an uncertainty the Company is exposed to is the impact of Brexit on NMR. NMR does not expect any structural or regulatory issues. The changes in the UK and European economic environment could impact revenues and profitability, but does not affect the going concern assessment. The changes to fair value accounting do not alter these risks as the Company remains reliant on NMR's guarantee for the EUR150m nominal amount and for interest payments.
The Company's market risk exposure is limited to interest rate and currency exchange rate movements. Exposure to interest rate movements on the perpetual subordinated note issues has been passed to NMR, as the issue proceeds have been lent onwards to NMR at a fixed margin of one basis point above the rate being paid. Currency risk is not considered significant as all material foreign currency balances and cash flows are matched.
Liquidity risk has similarly been transferred to NMR as the funds on-lent have the same maturity dates as the notes issued. Operational risk arising from inadequate or failed internal processes, people and systems or from external events is managed by maintaining a strong framework of internal controls.
By Order of the Board
Peter Barbour
New Court, St Swithin's Lane, London EC4N 8AL
30 April 2019
Report of the Directors
The Directors present their Directors' report and the financial statements for the year ended 31 December 2018.
Dividends
During the year, the Company did not pay any dividends (9 months ended 31 December 2017: GBP100,000).
Directors
The Directors who held office during the year were as follows:
Peter Barbour
Christopher Coleman
Mark Crump
Directors' Indemnity
The Company has provided qualifying third-party indemnities for the benefit of its Directors. These were provided during the year and remain in force at the date of this report.
Auditor
In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment of KPMG LLP as auditor of the Company is to be proposed at the forthcoming Annual General Meeting.
Audit Information
The Directors who held office at the date of approval of this Report of the Directors confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditors are unaware, and each Director has taken all the steps that he or she ought to have taken as a Director to make himself or herself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
Directors' Responsibilities Statement
The Directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) 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 year.
In preparing these financial statements, the Directors are required to:
Hot Features
Premium
-- Select suitable accounting policies and then apply them
consistently;
-- Make judgements and estimates that are reasonable, relevant
and reliable;
-- State whether they have been prepared in accordance with
IFRS as adopted by the EU;
-- Assess the Group and parent company's ability to continue
as a going concern, disclosing as applicable, matters related
to going concern; and
-- Use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations,
or have no realistic alternative but to do so.
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 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, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, and Corporate Governance Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility Statement of the Directors in respect of the Annual Financial Report
We confirm to the best of our knowledge:
-- The financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and
fair view of the assets, liabilities, financial position
and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and
-- The Strategic Report includes a fair review of the development
and performance of the business and the position of the
issuer and the undertakings included in the consolidation
taken as a whole, together with a description of the principal
risks and uncertainties that they face.
By Order of the Board
Peter Barbour
New Court, St. Swithin's Lane, London EC4N 8AL
30 April 2019
Independent Auditor's Report to the Members of Rothschild & Co Continuation Finance PLC
1. Our opinion is unmodified
We have audited the financial statements of Rothschild & Co Continuation Finance PLC ("the Company") for the year ended 31 December 2018 which comprise the statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement and the related notes, including the accounting policies in note 1.
In our opinion:
-- The financial statements give a true and fair view of the
state of the Company's affairs as at 31 December 2018 and
of the Company's profit for the year then ended;
-- The Company financial statements have been properly prepared
in accordance with International Financial Reporting Standards
as adopted by the European Union (IFRSs as adopted by the
EU);
-- The financial statements have been prepared in accordance
with the requirements of the Companies Act 2006
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent with our report to those charged with governance.
We were engaged as auditor by the Directors in 2001. The period of total uninterrupted engagement is the 17 years ended 31 December 2018. We have fulfilled our ethical responsibilities under, and we remain independent of the Company in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard were provided.
Overview
=====================================================================================
Materiality: GBP0.99m (31 December
financial statements as a whole 2017:GBP1.34m )
1% (31 December 2017:
1%) of
Total Assets
=================================== ================================================
Risks of material misstatement vs December 2017
=================================== ================================================ ===============================
Recurring risks
Loans to parent undertaking Loans to parent undertaking
and Debt securities and debt securities
in issue in issue are classified
at fair value upon adoption
of IFRS 9 on 1 January
2018. Therefore, a new
risk related to the
fair value of loans
and debt securities
in issue has been identified
in the current year.
As a result, the risk
of recoverability is
not separately identified.
================================= ================================================ =================================
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, 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. We summarise below the key audit matters in arriving at our audit opinion above, together with our key audit procedures to address those matters, and, as required for public interest entities, our results from those procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.
The risk Our response
====================== ================================ ============================================================
The impact of Unprecedented levels We have developed a standardised
uncertainties of uncertainty firm-wide approach to the
due to Britain All audits assess and consideration of the uncertainties
exiting the European challenge the reasonableness arising from Brexit in
Union on our audit of estimates, in particular planning and performing
Refer to page as described in loans our audits. Our procedures
2 (principal risks to parent undertaking, included:
and uncertainties) effective interest * Our Brexit knowledge - We considered the directors'
rate adjustment below, assessment of Brexit-related sources of risk for the
related disclosures Company's business and financial resources compared
and the appropriateness with our own understanding of the risks. We
of the going concern considered the directors' plans to take action to
basis of preparation mitigate the risks.
of the annual accounts.
All of these depend
on assessments of the * Sensitivity analysis - When addressing the fair value
future economic environment of loans to parent undertaking and debt securities in
and the Company's future issue, we compared the directors' sensitivity
prospects and performance. analysis to our assessment of the full range of
In addition, we are reasonably possible scenarios resulting from Brexit
required to consider uncertainty.
the other information
presented in the Annual
Report including the * Assessing transparency - As well as assessing
principal risks disclosure individual disclosures as part of our procedures on
and to consider the loans to parent undertaking, we considered all the
directors' statement Brexit related disclosures together, including those
that the annual report in the strategic report, comparing the overall
and financial statements picture against our understanding of the risks.
taken as a whole is
fair, balanced and
understandable and Our results
provides the information As reported under loans
necessary for shareholders to parent undertaking and
to assess the Company's debt securities in issue,
position and performance, we found the resulting
business model and disclosures of sensitivity
strategy. and disclosures in relation
to going concern to be
Brexit is one of the acceptable. However, no
most significant economic audit should be expected
events for the UK and to predict the unknowable
at the date of this factors or all possible
report its effects future implications for
are subject to unprecedented a Company and this is particularly
levels of uncertainty the case in relation to
of outcomes, with the Brexit.
full range of possible
effects unknown.
====================== ================================ ============================================================
The risk Our response
========================= ============================= ============================================================
Valuation of Loans Low Risk, high value: Our procedures included:
to parent undertaking The amount of the * Test of details: We involved our valuation
and debt securities intercompany loan specialists to independently determine the fair value
in issue receivable represents of the loans to parent and the debt securities in
Loans to parent 99% (December 2017: issue at the IFRS 9 transition date of 1 January 2018
undertaking (GBP99 99%) of the Company's and as at the year ended 31 December 2018.
million; 31 December total assets.
2017: GBP133 million) The terms of the loan
Debt securities to parent are similar * We assessed whether the Company's disclosures in
in issue (GBP98.9 to the debt securities relation to fair value were in compliance with the
million; 31 December in issue. The fair relevant standards.
2017: GBP133 million) value of debt securities
in issue is based
Refer to page 18 on available quotes Our results:
(Note 6) and page from brokers and third * We found the valuation of loans to parent undertaking
20 (Note 11) (financial party transactions and debt securities in issue, and the relevant
disclosure) where available. As disclosures to be acceptable. (December 2017: N/A)
a result, valuation
is not at a high risk
of material misstatement
or subject to significant
judgement.
However, due to its
materiality in the
context of the financial
statements, valuation
of loan to parent
undertaking and debt
securities in issue
is considered to be
an area that has the
greatest effect on
our audit.
========================= ============================= ============================================================
3. Our application of materiality and an overview of the scope of our audit
Materiality for the Company as a whole was set at GBP0.99m (31 December 2017: GBP1.34m) determined with reference to a benchmark of total assets (of which it represents 1% (31 December 2017: 1%). The threshold for reporting misstatements to those charged with governance was GBP0.05m (31 December 2017: GBP0.07m).
4. We have nothing to report on going concern
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or to cease its operations, and as they have concluded that the Company's financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over its ability to continue as a going concern for at least a year from the date of approval of the financial statements ("the going concern period").
Our responsibility is to conclude on the appropriateness of the Directors' conclusions and, had there been a material uncertainty related to going concern, to make reference to that in this audit report. However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of reference to a material uncertainty in this auditor's report is not a guarantee that the Company will continue in operation.
In our evaluation of the Directors' conclusions, we considered the inherent risks to the Company's business model, including the impact of Brexit and analysed how those risks might affect the Company's financial resources or ability to continue operations over the going concern period. We evaluated those risks and concluded they were not significant enough to require us to perform additional audit procedures.
Based on this work, we are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least a year from the date of approval of the financial statements.
We have nothing to report in these respects, and we did not identify going concern as a key audit matter.
5. We have nothing to report on the other information in the financial statements
The Directors are responsible for the other information presented in the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information.
Strategic Report and Directors' Report
Based solely on our work on the other information:
-- We have not identified material misstatements in the Strategic
Report and the Directors' Report;
-- In our opinion the information given in those reports for
the financial year is consistent with the financial statements;
and
-- In our opinion those reports have been prepared in accordance
with the Companies Act 2006.
6. We have nothing to report on the other matters on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in our opinion:
-- 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
-- The Company 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.
We have nothing to report in these respects.
7. Respective responsibilities
Directors' responsibilities
As explained more fully in their statements set out on page 3, the Directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; 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; 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 they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities
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 other irregularities (see below), or error, and to issue our opinion in an auditor's report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud, other irregularities or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC's website at: www.frc.org.uk/auditorsresponsibilities
Irregularities - ability to detect
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the annual accounts from our general commercial and sector experience, through discussion with the directors (as required by auditing standards), and from inspection of the Group's regulatory correspondence and discussed with the directors the policies and procedures regarding compliance with laws and regulations. We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit. The potential effect of these laws and regulations on the financial statements varies considerably.
The company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation (including related companies legislation), distributable profits legislation, and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
Whilst the company is subject to many other laws and regulations, we did not identify any others where the consequences of non-compliance alone could have a material effect on amounts or disclosures in the financial statements.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.
8. The purpose of our audit work and to whom we owe our responsibilities
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.
Pamela McIntyre (senior Statutory Auditor)
For and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London E14 5GL
30 April 2019
Statement of Comprehensive Income
For the year ended 31 December 2018
Year to 9 months
31 December to
2018 31 December
2017
Note GBP GBP
------------------------------------------- ----- ------------- -------------
Interest income 1,560,498 1,159,766
------------------------------------------- ----- ------------- -------------
Interest expense (1,548,915) (1,150,814)
------------------------------------------- ----- ------------- -------------
Operating profit 11,583 8,952
------------------------------------------- ----- ------------- -------------
Revaluation of loan to parent undertaking 6 (21,211,913) -
------------------------------------------- ----- ------------- -------------
Revaluation of debt securities in
issue 11 21,213,299 -
------------------------------------------- ----- ------------- -------------
Foreign exchange translation profits 1,325 17,001
------------------------------------------- ----- ------------- -------------
Profit before tax 14,294 25,953
------------------------------------------- ----- ------------- -------------
Taxation 5 (2,688) (4,933)
------------------------------------------- ----- ------------- -------------
Profit for the financial year 11,606 21,020
------------------------------------------- ----- ------------- -------------
Other comprehensive income - -
------------------------------------------- ----- ------------- -------------
Total comprehensive income for the
financial year 11,606 21,020
------------------------------------------- ----- ------------- -------------
All amounts are in respect of continuing activities.
Balance Sheet
At 31 December 2018
At 31 December At 31 December
2018 2018 2017 2017
Note GBP GBP GBP GBP
----------------------------------------- ---------- ------------- ----------- --------------
Non-current assets
Loan to parent undertaking 6 99,189,288 133,151,064
------------------------------------- --- ---------- ------------- ----------- --------------
Current assets
------------------------------------- --- ---------- ------------- ----------- --------------
Cash and cash equivalents 8 392,172 238,794
------------------------------------- --- ---------- ------------- ----------- --------------
Other financial assets 7 252,361 203,425
------------------------------------- --- ---------- ------------- ----------- --------------
644,533 442,219
------------------------------------- --- ---------- ------------- ----------- --------------
Current liabilities
Overdrafts 8 (168,639) (23,186)
------------------------------------- --- ---------- ------------- ----------- --------------
Current tax liability 5 (2,452) (4,931)
------------------------------------- --- ---------- ------------- ----------- --------------
Deferred tax liability 9 (34,190) -
------------------------------------- --- ---------- ------------- ----------- --------------
Other financial liabilities 10 (250,275) (201,391)
------------------------------------- --- ---------- ------------- ----------- --------------
Net current (liabilities)/assets 188,977 212,711
------------------------------------- --- ---------- ------------- ----------- --------------
Total assets less current liabilities 99,378,265 133,363,775
------------------------------------------------------ ------------- ----------- --------------
Non-current liabilities
Debt securities in
issue 11 (98,988,175) (133,151,064)
------------------------------------- --- ---------- ------------- ----------- --------------
Net assets 390,090 212,711
------------------------------------- --- ---------- ------------- ----------- --------------
Shareholders' equity
Share capital 13 100,000 100,000
------------------------------------- --- ---------- ------------- ----------- --------------
Retained earnings 290,090 112,711
------------------------------------- --- ---------- ------------- ----------- --------------
Total shareholders'
equity 390,090 212,711
------------------------------------- --- ---------- ------------- ----------- --------------
Approved by the Board of Directors and signed on its behalf on 30 April 2019 by:
Peter Barbour, Director
Statement of Changes in Equity
For the year ended 31 December 2018
Share Retained Total
Capital Earnings Equity
GBP GBP GBP
-------------------------------- --------- ---------- ----------
At 31 December 2017 100,000 112,711 212,711
-------------------------------- --------- ---------- ----------
Transition to IFRS 9 - 165,773 165,773
-------------------------------- --------- ---------- ----------
Restated Balance at 1 January
2018 100,000 278,484 378,484
-------------------------------- --------- ---------- ----------
Total comprehensive profit for
the financial year - 11,606 11,606
-------------------------------- --------- ---------- ----------
At 31 December 2018 100,000 290,090 390,090
-------------------------------- --------- ---------- ----------
At 1 April 2017 100,000 191,691 291,691
-------------------------------- --------- ---------- ----------
Total comprehensive profit for
the financial year - 21,020 21,020
-------------------------------- --------- ---------- ----------
Shareholders' dividends - (100,000) (100,000)
-------------------------------- --------- ---------- ----------
At 31 December 2017 100,000 112,711 212,711
-------------------------------- --------- ---------- ----------
Cash Flow Statement
For the year ended 31 December 2018
Year to 9 months
31 December to
2018 31 December
2017
Note GBP GBP
-------------------------------------------- ----- ------------- --------------
Cash flow from operating activities
Net profit for the financial year 11,606 21,020
-------------------------------------------- ----- ------------- --------------
Tax charge 2,688 4,933
-------------------------------------------- ----- ------------- --------------
Operating profit before changes in
working capital and provisions 14,294 25,953
-------------------------------------------- ----- ------------- --------------
Fair value movements of loans 21,211,913 -
-------------------------------------------- ----- ------------- --------------
Fair value movements of debt securities (21,213,299) -
-------------------------------------------- ----- ------------- --------------
Cash from operations 12,908 25,953
-------------------------------------------- ----- ------------- --------------
Taxation paid (4,931) (5,170)
-------------------------------------------- ----- ------------- --------------
Net cash from operating activities 7,977 20,783
-------------------------------------------- ----- ------------- --------------
Cash from financing activities
Net decrease/(increase) in loans
and interest receivable (48,936) (4,772,155)
-------------------------------------------- ----- ------------- --------------
Net (decrease)/increase in debt securities
in issue and interest payable 48,884 4,772,045
-------------------------------------------- ----- ------------- --------------
Dividends paid - (100,000)
-------------------------------------------- ----- ------------- --------------
Net cash flow from financing activities (52) (100,110)
-------------------------------------------- ----- ------------- --------------
Net (decrease)/increase in cash and
cash equivalents 7,925 (79,327)
-------------------------------------------- ----- ------------- --------------
Cash and cash equivalents at beginning
of year 215,608 294,935
-------------------------------------------- ----- ------------- --------------
Cash and cash equivalents at end
of year 8 223,533 215,608
-------------------------------------------- ----- ------------- --------------
Interest receipts and payments during the year were as follows:
Year to 9 months
31 December to
2018 31 December
2017
GBP GBP
------------------------------------------- ------------- -------------
Interest received from parent undertaking 1,511,562 1,239,241
-------------------------------------------- ------------- -------------
Interest paid to note holders 1,500,031 1,230,399
-------------------------------------------- ------------- -------------
Notes to the Financial Statements
(forming part of the Financial Statements)
For the year ended 31 December 2018
1. Accounting Policies
Rothschild & Co Continuation Finance PLC ("the Company") is a public limited company incorporated in England and Wales. The principal accounting policies which have been consistently adopted in the presentation of the financial statements are as follows:
a. Basis of preparation
The financial statements are prepared and approved by the Directors in accordance with International Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations, endorsed by the European Union ("EU") and with those requirements of the Companies Act 2006 applicable to companies reporting under IFRS.
The maturities of the Company's liabilities are matched with the maturities of its assets, there is, therefore a strong expectations that the Company has adequate resources to continue in operational existence for the foreseeable future at least twelve months from the date the financial statements are signed and accordingly, the financial statements have been prepared on a going concern basis.
The financial statements are presented in sterling, unless otherwise stated.
Standards affecting the financial statements
IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers were implemented with effect from 1 January 2018. IFRS 15 has not had a significant effect on these financial statements.
IFRS 9, which replaces IAS 39 Financial Instruments: Recognition and Measurement, includes revised guidance in respect of the classification and measurement of financial assets and liabilities and introduces additional requirements for liabilities and hedge accounting as well as a new expected credit loss model for calculating impairment on financial assets.
Previously financial assets were classified as either fair value through profit or loss, loans and advances, held-to-maturity investments or available-for-sale. IFRS 9 eliminates the loans and advances categories, and requires financial assets to be measured at amortised cost, fair value through profit or loss ("FVTPL") or fair value through other comprehensive income ("FVOCI").
IFRS 9 resulted in the requirement to fair value the loans to the parent undertaking, and as a result the Company has elected to fair value the debt securities in issue. The full impact of this transition to IFRS 9 can be seen in note 16.
Future accounting policies
A number of new standards, amendments to standards and interpretations are effective for accounting periods ending after 31 December 2018 and therefore have not been applied in preparing these financial statements. The Company has reviewed these new standards to determine their effects on the Company's financial reporting, and none are expected to have a material impact on the Company's financial statements.
b. Interest receivable and payable
Interest income and expense represents interest arising out of lending and borrowing activities. Interest income and expense is recognised in the income statement using the effective interest rate method.
Foreign currencies
Transactions in foreign currencies are accounted for at the exchange rates prevailing at the time of the transaction. Gains and losses resulting from the settlement of such transactions, and from the translation at period end exchange rates of monetary items that are denominated in foreign currencies, are recognised in the statement of comprehensive income.
c. Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise balances with other group companies that are readily convertible to cash and are subject to an insignificant risk of changes in value.
d. Taxation
Tax payable on profits is recognised in the statement of comprehensive income.
Deferred tax is provided in full, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts. Deferred tax is determined using tax rates and laws that are expected to apply when a deferred tax asset is realised, or when a deferred tax liability is settled.
e. Capital management
The Company is not subject to any externally imposed capital requirements.
f. Financial assets and liabilities
Financial assets and liabilities are recognised on trade date and derecognised on either trade date, if applicable, or on maturity or repayment.
i. Loans and advances
Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
From 1 January 2018, loans and advances are initially recorded at fair value and any subsequent movement in fair value is recognised in the income statement.
Prior to 1 January 2018, loans and advances were initially recorded at fair value, including any transaction costs and are subsequently measured at amortised cost using the effective interest rate method. Gains and losses arising on derecognition of loans and advances are recognised in other operating income.
ii. Financial liabilities
From 1 January 2018, debt securities in issue are recorded at fair value with any changes in fair value recognised in the income statement. All other financial liabilities are recognised at amortised cost.
Prior to 1 January 2018, all financial liabilities were carried at amortised cost using the effective interest rate method.
g. Accounting judgements and estimates
The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the accounting policies.
Valuation of financial assets and liabilities
Fair value is the price that would be received on selling an asset or paid to transfer a liability in an orderly transaction between market participants. For financial instruments carried at fair value, market prices or rates are used to determine fair value where an active market exists (such as a recognised exchange), as this is the best evidence of the fair value of a financial instrument. Where no active market price or rate is available, fair values are estimated using inputs based on market conditions at the balance sheet date.
Deferred tax
The recoverability of deferred tax assets is based on management's assessment of the availability of future taxable profits against which the deferred tax assets will be utilised.
2. Financial Risk Management
The Company follows the financial risk management policies of the parent undertaking, N M Rothschild & Sons Limited. The key risks arising from the Company's activities involving financial instruments, which are monitored at the group level, are as follows:
Credit risk - the risk of loss arising from client or counterparty default is not considered a significant risk to the Company as all asset balances are with other group companies as detailed in note 14 Related Party Transactions.
Market risk - exposure to changes in market variables such as interest rates, currency exchange rates, equity and debt prices is not considered significant as the terms of financial assets substantially match those of financial liabilities.
Liquidity risk - the risk that the Company is unable to meet its obligations as they fall due or that it is unable to fund its commitments is not considered significant as the risk has been transferred to NMR. As the funds on-lent to NMR have the same maturity dates as the notes issued, the Company's ability to meet its obligations in respect of notes issued by it is affected by NMR's ability to make payments to the Company.
3. Audit Fee
The amount receivable by the auditors and their associates in respect of the audit of these financial statements is GBP5,000 (9 months to 31 December 2017: GBP5,000). The audit fee is paid on a group basis by N M Rothschild & Sons Limited.
4. Directors' Emoluments
None of the Directors received any remuneration in respect of their services to the Company during the year (9 months to 31 December 2017: GBPnil).
5. Taxation
Year to 9 months
31 December to
2018 31 December
2017
GBP GBP
-------------- ------------- -------------
Current tax 2,452 4,933
-------------- ------------- -------------
Deferred tax 236 -
-------------- ------------- -------------
Total tax 2,688 4,933
-------------- ------------- -------------
The tax charge can be explained as follows:
Year to 9 months
31 December to
2018 31 December
2017
GBP GBP
--------------------------------------- ------------- -------------
Profit before tax 14,294 25,953
--------------------------------------- ------------- -------------
United Kingdom corporation tax charge
at 19% 2,716 4,931
--------------------------------------- ------------- -------------
Income not subject to tax (264) -
--------------------------------------- ------------- -------------
Deferred taxation 236
--------------------------------------- ------------- -------------
Prior year adjustments - 2
--------------------------------------- ------------- -------------
Total current tax 2,688 4,933
--------------------------------------- ------------- -------------
6. Non-Current Assets: Loan to Parent Undertaking
Year to 9 months
31 December to
2018 31 December
2017
GBP GBP
--------------------------------------- ------------- --------------
At beginning of period 133,151,064 128,299,434
--------------------------------------- ------------- --------------
Revaluation due to transition to IFRS (13,674,614) -
9
--------------------------------------- ------------- --------------
119,476,450 128,299,434
--------------------------------------- ------------- --------------
FX movements 924,751 4,851,630
--------------------------------------- ------------- --------------
Fair value movements (21,211,913) -
--------------------------------------- ------------- --------------
At end of period 99,189,288 133,151,064
--------------------------------------- ------------- --------------
Due
In 5 years or more 99,189,288 133,151,064
--------------------------------------- ------------- --------------
IFRS 9 requires the EUR150,000,000 loan to be carried at fair value which as at 31 December 2018 was GBP99,189,288 (at 31 December 2017: GBP119,476,450). On an amortised cost basis, the value of the loan at 31 December 2018 would be GBP134,075,815 (at 31 December 2017: GBP133,151,064). The fair values are based on the market value of the external debt securities (level 2).
The interest rate charged on the EUR150 million loan is EUR-TEC10-CNO plus 36 basis points, capped at 9.01 per cent, fixed on 05 February, 05 May, 05 August and 05 November each year. The effective interest rate on the above loan at 31 December 2018 was 1.13% (at 31 December 2017: 1.00%).
7. Current Assets: Other Financial Assets
31 December 31 December
2018 2017
GBP GBP
------------------------------------- ------------ ------------
Amounts owed by parent undertaking:
Interest receivable 252,361 203,425
------------------------------------- ------------ ------------
8. Cash and Cash Equivalents
At the year end the Company held cash of GBP223,533 (at 31 December 2017: GBP215,608) at the parent undertaking. Of this balance, GBP168,639 was held as an overdraft in a sterling account (at 31 December 2017: GBP23,186). The equivalent of GBP392,172 (at 31 December 2017: GBP238,794) was held in a euro account. The effective interest rate at 31 December 2018 was 0.0% (at 31 December 2017: 0.0%).
9. Deferred Income Taxes
Year to 9 months
31 December to
2018 31 December
2017
GBP GBP
------------------------ ------------- -------------
At beginning of period - -
------------------------ ------------- -------------
Transition to IFRS 9 (33,954) -
------------------------ ------------- -------------
Recognised in income
Income statement charge (236) -
------------------------ ------------- -------------
At end of period (34,190) -
------------------------ ------------- -------------
Deferred tax assets less liabilities are attributable to the following items:
Year to 9 months
31 December to
2018 31 December
2017
GBP GBP
--------------------------------------- ------------- -------------
Fair value of intra group loans 5,930,710 -
--------------------------------------- ------------- -------------
Fair value of debt securities in issue (5,964,900) -
--------------------------------------- ------------- -------------
(34,190) -
--------------------------------------- ------------- -------------
Both the intra-group loans and debt securities in issue are taxed on an amortised cost basis of accounting and accordingly taxable/deductible temporary differences arise following the adoption of IFRS 9.
10. Current Liabilities: Other Financial Liabilities
31 December 31 December
2018 2017
GBP GBP
------------------ ------------ ------------
Interest payable 250,275 201,391
------------------ ------------ ------------
11. Non-Current Liabilities: Debt Securities in Issue
Year to 9 months
31 December to
2018 31 December
2017
GBP GBP
--------------------------------------- ------------- --------------
At beginning of period 133,151,064 128,299,434
--------------------------------------- ------------- --------------
Revaluation due to transition to IFRS (13,874,341) -
9
--------------------------------------- ------------- --------------
119,276,723 128,299,434
--------------------------------------- ------------- --------------
FX movements 924,751 4,851,630
--------------------------------------- ------------- --------------
Fair value movements (21,213,299) -
--------------------------------------- ------------- --------------
At end of period 98,988,175 133,151,064
--------------------------------------- ------------- --------------
Repayable
In 5 years or more 98,988,175 133,151,064
--------------------------------------- ------------- --------------
Given the IFRS 9 requirement to fair value the related loans, the Company has elected to fair value the debt securities in issue, which as at 31 December 2018 was GBP98,988,175 (at 31 December 2017: GBP119,276,723). On an amortised cost basis, the value of the debt securities in issue at 31 December 2018 would be GBP134,075,815 (at 31 December 2017: 133,151,064). The fair value was derived from the quoted market price at the balance sheet date (level 1).
The interest rate payable on the EUR150 million Perpetual Subordinated Notes is EUR-TEC10-CNO plus 35 basis points, capped at 9 per cent, fixed on 05 February, 05 May, 05 August and 05 November each year. From and including the interest payment date falling in August 2016 and every interest payment date thereafter, the Company may redeem all (but not some only) of the Perpetual Subordinated Notes at their principal amount.
The effective interest rate on the above notes at 31 December 2018 was 1.12% (at 31 December 2017: 0.99%).
12. Maturity of Financial Liabilities
The following table shows contractual cash flows payable by the Company on the perpetual subordinated notes, analysed by remaining contractual maturity at the balance sheet date. Interest cashflows on perpetual subordinated notes are estimated and shown up to five years only, with the principal balance being shown in the perpetual column.
3 months
or less 1 year 5 years
but not or less or less
payable but over but over
Demand on demand 3 months 1 year Perpetual Total
At 31 December GBP GBP GBP GBP GBP GBP
2018
----------------------- ------ --------- --------- --------- ----------- -----------
Perpetual subordinated
notes - 375,415 1,126,237 6,006,597 134,075,815 141,584,064
----------------------- ------ --------- --------- --------- ----------- -----------
3 months
or less 1 year 5 years
but not or less or less
payable but over but over
Demand on demand 3 months 1 year Perpetual Total
At 31 December GBP GBP GBP GBP GBP GBP
2017
----------------------- ------ --------- --------- --------- ----------- -----------
Perpetual subordinated
notes - 329,549 988,647 5,272,784 133,151,064 139,742,044
----------------------- ------ --------- --------- --------- ----------- -----------
13. Share Capital
31 December 31 December
2018 2017
GBP GBP
------------------------------------------- ------------ ------------
Authorised, allotted, called up and fully
paid
100,000 Ordinary shares of GBP1 each 100,000 100,000
------------------------------------------- ------------ ------------
14. Related Party Transactions
Parties are considered to be related if one party controls, is controlled by or has the ability to exercise significant influence over the other party. This includes key management personnel, the parent company, subsidiaries and fellow subsidiaries.
Amounts receivable from related parties at the year-end were as follows:
31 December 31 December
2018 2017
GBP GBP
------------------------------------------------- ------------ ------------
Cash and cash equivalents at parent undertaking 223,533 215,608
------------------------------------------------- ------------ ------------
Accrued interest receivable from parent
undertaking 252,361 203,425
------------------------------------------------- ------------ ------------
Loans to parent undertaking - at amortised
cost - 133,151,064
------------------------------------------------- ------------ ------------
Loans to parent undertaking - at fair 99,189,288 -
value
------------------------------------------------- ------------ ------------
Amounts recognised in the statement of comprehensive income in respect of related party transactions were as follows:
Year to 9 months
31 December to
2018 31 December
2017
GBP GBP
----------------------------------------- ------------- -------------
Interest income from parent undertaking 1,560,498 1,159,766
----------------------------------------- ------------- -------------
Amounts recognised directly in equity in respect of related party transactions were as follows:
Year to 9 months
31 December to
2018 31 December
2017
GBP GBP
---------------------------------------- -------------- -------------
Dividend payable to parent undertaking - 100,000
---------------------------------------- -------------- -------------
There were no loans made to Directors during the year (9 months to 31 December 2017: none) and no balances outstanding at the year-end (at 31 December 2017: GBPnil). The Directors did not receive any remuneration in respect of their services to the Company. There were no employees of the Company during the year (9 months to 31 December 2017: none).
15. Parent Undertaking, Ultimate Holding Company and Registered Office
The largest group in which the results of the Company are consolidated is that headed by Rothschild & Co Concordia SAS, incorporated in France, and whose registered office is at 23bis, Avenue de Messine, 75008 Paris. The smallest group in which they are consolidated is that headed by Rothschild & Co SCA, a French public limited partnership whose registered office is also at 23bis, Avenue de Messine, 75008 Paris. The accounts are available on Rothschild & Co website at www.rothschildandco.com.
The Company's immediate parent company is N M Rothschild & Sons Limited, incorporated in England and Wales and whose registered office is at New Court, St Swithin's Lane, London EC4N 8AL.
The Company's registered office is located at New Court, St Swithin's Lane, London EC4N 8AL.
16. Transition to IFRS 9 on 1 January 2018
a) Classification of financial assets and liabilities.
The following table shows the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of financial assets and liabilities as at 1 January 2018:
Original Original
classification New classification carrying New carrying
under IAS under IFRS value under value under
39 9 IAS 39 IFRS 9
Note GBP'000 GBP'000
----------------------- ------ ----------------- -------------------- ------------- -------------
Financial assets
Loan to parent Amortised
company cost FVTPL 133,151,064 119,476,450
------------------------------- ----------------- ------------------- ------------- -------------
Total financial
assets 133,151,064 119,476,450
------------------------------------------------------------------------ ------------- -------------
Financial liabilities
Debt securities Amortised
in issue cost FVTPL 133,151,064 119,276,723
------------------------------- ----------------- ------------------- ------------- -------------
Total financial
liabilities 133,151,064 119,276,723
------------------------------------------------------------------------ ------------- -------------
b) Impact of transition to IFRS 9
The following table shows the effect on the Company's balance sheet of the transition from IAS 39 to IFRS 9:
IAS 39 Balance IFRS 9 Balance
Sheet 31 Classification Sheet 1
December and measurement January
2017 changes 2018
GBP'000 GBP'000 GBP'000
------------------------------ --------------- ----------------- ---------------
Assets
Loan to parent company 133,151,064 (13,674,614) 119,476,450
------------------------------ --------------- ----------------- ---------------
Cash and cash equivalents 238,794 - 238,794
------------------------------ --------------- ----------------- ---------------
Other financial assets 203,425 - 203,425
------------------------------ --------------- ----------------- ---------------
Total assets 133,593,283 (13,674,614) 119,918,669
------------------------------ --------------- ----------------- ---------------
Liabilities
Overdrafts 23,186 - 23,186
------------------------------ --------------- ----------------- ---------------
Current tax liability 4,931 - 4,931
------------------------------ --------------- ----------------- ---------------
Deferred tax liability - 33,954 33,954
------------------------------ --------------- ----------------- ---------------
Other financial liabilities 201,391 - 201,391
------------------------------ --------------- ----------------- ---------------
Debt securities 133,151,064 (13,874,341) 119,276,723
------------------------------ --------------- ----------------- ---------------
Total liabilities 133,380,572 (13,840,387) 119,540,185
------------------------------ --------------- ----------------- ---------------
Equity
Share capital 100,000 - 100,000
------------------------------ --------------- ----------------- ---------------
Retained earnings 112,711 165,773 278,484
------------------------------ --------------- ----------------- ---------------
Total equity 212,711 165,773 378,484
------------------------------ --------------- ----------------- ---------------
Total equity and liabilities 133,593,283 (13,674,614) 119,918,669
------------------------------ --------------- ----------------- ---------------
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR EAKLEDDPNEFF
(END) Dow Jones Newswires
April 30, 2019 12:42 ET (16:42 GMT)
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