Name | Symbol | Market | Type |
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Roth.c.f.nts14 | LSE:68WN | London | Bond |
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0.00 | 0.00% | 72.50 | 0 | 00:00:00 |
TIDM68WN
RNS Number : 7831W
Rothschild & Co Continuation Fin
27 April 2021
Rothschild & Co Continuation Finance PLC
Report of the Directors and Financial Statements
for the year ended 31 December 2020
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.
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 best reflects the purpose of the Company as a pass through financing vehicle and to match the EUR150m loan asset and subordinated guaranteed notes in issue. On this basis, the loan asset and subordinated guaranteed notes would be matched on the balance sheet at GBP135m to reflect the real asset and liability position of the Company. However, IFRS 9 requires the Company to report the loan asset, and the Company has elected to report the subordinated guaranteed notes in issue, at fair value of cGBP111m. Positive movements in the valuation of the asset and liability resulted in a small accounting profit being reported for the year and the Company has increased its cash balances and remains well capitalised.
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.
COVID-19 has created significant disruption to the global markets and economies. Management has performed an assessment to determine whether there are any material uncertainties arising due to the pandemic that could cast significant doubt on the ability of the Company to continue as a going concern.
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 is therefore reliant on the ability of NMR to meet its obligations under these lending arrangements. NMR is exposed to the aforementioned market disruption but, nevertheless, has sufficient liquidity to continue to operate for the next 12 months even in the scenario where revenue is significantly reduced. Management has considered the going concern basis of preparation as outlined in note 1 to the financial statements.
The Company's processes are undertaken by another group undertaking. As a result of events the activities of this group undertaking are now being conducted remotely with all employees supported by enhanced existing technology and IT infrastructure. All critical systems continue to operate effectively and there has been minimal disruption in activity. The Company continues to carefully monitor and mitigate the risk on an ongoing basis in order to minimise exposure.
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.
S172 statement
The Board has a duty under s172 of the Companies Act 2006 to promote the success of the Company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
a) the likely consequences of any decision in the long term, b) the interests of the Company's employees,
c) the need to foster the Company's business relationships with suppliers, customers and others,
d) the impact of the Company's operations on the community and the environment,
e) the desirability of the Company maintaining a reputation for high standards of business conduct, and
f) the need to act fairly as between members of the Company.
During the year the Board has considered its duties under s172 and how it fulfils its obligations thereof. Given that the Company has no staff and limited suppliers, the key stakeholders are thought to be shareholders, regulators and tax authorities:
Shareholders
The Board is appointed by the shareholders to oversee, govern and make decisions on their behalf and so is directly responsible for protecting and managing their interests in the Company. It does this by setting the strategies, policies and corporate governance structures described earlier. As part of the wider R&Co Group, some of these responsibilities are managed at a group level and described in greater detail in the R&Co financial statements that are available on www.rothschildandco.com/en/investor-relations/.
Regulators and tax authorities
The Company insists on the highest standards of professionalism and integrity from those that act on its behalf who are expected to refrain from any conduct or behaviours that could be perceived unfavourably. This extends to dealing honestly and openly with regulators and tax authorities and in compliance with all the relevant laws and regulations in place.
By Order of the Board
Peter Barbour
Director
27 April 2021
Report of the Directors
The Directors present their Directors' report and the financial statements for the year ended 31 December 2020.
Dividends
During the year, the Company did not pay any dividends (2019: GBPnil).
Directors
The Directors who held office during the year were as follows:
Peter Barbour
Christopher Coleman
Mark Crump
Paul O'Leary (appointed 28 April 2020)
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.
By Order of the Board
Peter Barbour
Director
27 April 2021
Statement of Directors' responsibilities in respect of the strategic report, Directors' report and the financial statements
The Directors are responsible for preparing the Strategic Report, 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 accounting standards in conformity with the requirements of the Companies Act 2006 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 its profit or loss for that period. In preparing the financial statements, the Directors are required to:
-- 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 international accounting standards in conformity with the requirements of the Companies Act 2006 ; -- assess the 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 its 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 Company 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 that 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 strategic report includes a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face.
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 2020 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 2020 and of its profit for the year then ended; -- have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006; and -- 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 the audit committee.
We were first appointed as auditor by the Directors in 2001. The period of total uninterrupted engagement is for the 20 financial years ended 31 December 2020. 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.
Overvi ew ========================================================================== Materi al ity: GBP1.11 m (31 December financial statements as a whole 2019: GBP1.05 million ) 1% (31 December 2019: 1%) of Total Assets =========================================== ============================= Ri sks of material misstatement vs December 2019 =========================================== ============================= Recurring risks Valuation of loans No change to parent undertaking and Debt securities in issue ================== =========================== =========================
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 matter in arriving at our audit opinion above, together with our key audit procedures to address the matter and, as required for public interest entities, our results from those procedures. This matter was addressed, and our result is 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 the matter.
Key audit matter The risk Our response ========================= ======================== ================================================================= Valuation of Loans Low Risk, high value: Our procedures included: to parent undertaking and debt securities The amount of the * Test of details: We involved our valuation in issue intercompany loan specialists to independently determine the fair value receivable represents of the loan to the parent undertaking and the debt Loan to parent 99% (December 2019: securities in issue at 31 December 2020. undertaking 99%) of the Company's (GBP 110.97 million; total assets. 31 December 2019: GBP104.62 million) The terms of the loan * We assessed whether the Company's disclosures in to parent are similar relation to fair value were in compliance with the to the debt securities relevant standards. Debt securities in in issue. The fair issue (GBP110.77 value of debt million ; 31 December securities 2019: GBP104.43 in issue is based Our results: million) on available quotes from brokers and * We found the valuation of loans to parent undertaking Refer to page 21 third-party and debt securities in issue, and the relevant (Note 6) and page transactions where disclosures to be acceptable. (December 2019: 23 (Note 11) (financial available. As a acceptable) disclosure ) 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. The IFRS 13 fair value measurement disclosures are key to explaining the valuation techniques, key judgements, assumptions and material inputs. ========================= ======================== =================================================================
3. Our application of materiality and an overview of the scope of our audit
Materiality for the Company financial statements as a whole was set at GBP1.11 million (2019: GBP1.05 million), determined with reference to a benchmark of total assets (of which it represents 1% (2019: 1%)). In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole.
Performance materiality was set at 75% (2019: 75%) of materiality for the financial statements as a whole, which equates to GBP0.83 million (2019: GBP0.78 million). We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk.
We agreed to report to the Board any corrected or uncorrected identified misstatements exceeding GBP0.06 million (2019: GBP0.05 million), in addition to other identified misstatements that warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level specified above and was all performed at the Company's head office in London.
4. 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").
We used our knowledge of the Company, its industry, and the general economic environment to identify the inherent risks to its business model and analysed how those risks might affect the Company's financial resources or ability to continue operations over the going concern period. The risks that we considered most likely to adversely affect the Company's available financial resources over this period was the availability of funding and liquidity in the event of a market wide stress scenario including a prolonged global impact of the COVID-19 pandemic.
We considered whether these risks could plausibly affect the liquidity in the going concern period by comparing severe, but plausible downside scenarios that could arise from these risks individually and collectively against the level of available financial resources indicated by the Company's financial forecasts.
Our procedures also included an assessment of whether the going concern disclosure in note 1 to the financial statements gives a full and accurate description of the Directors' assessment of going concern.
Our conclusions based on this work:
-- we consider that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate; -- we have not identified, and concur with the Directors' assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for the going concern period; and -- we found the going concern disclosure in note 1 to be acceptable.
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 above conclusions are not a guarantee that the Company will continue in operation.
5. Fraud and breaches of laws and regulations - ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud ("fraud risks") we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:
-- Enquiring of members, and senior management and inspection of policy documentation as to the Company's high-level policies and procedures to prevent and detect fraud, including the internal audit function, and the Company's channel for "whistleblowing", as well as whether they have knowledge of any actual, suspected or alleged fraud; -- Reading Board minutes; and -- Using analytical procedures to identify any unusual or unexpected relationships.
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit.
As required by auditing standards, we perform procedures to address the risk of management override of controls, in particular the risk that management may be in a position to make inappropriate accounting entries. On this audit we do not believe there is a fraud risk related to revenue recognition because of the limited opportunity to commit fraud due to the fact that revenue transactions are not complex and there are no judgmental aspects involved.
We did not identify any additional fraud risks.
We performed procedures including identifying journal entries and other adjustments to test based on risk criteria and comparing the identified entries to supporting documentation. These included those posted by senior finance management, those posted and approved by the same user, those posted to unusual accounts, and any unusual pairings identified.
Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations;
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience, and through discussion with the Directors and other management (as required by auditing standards), and from inspection of the Company's regulatory and legal correspondence and discussed with the Directors and other management the policies and procedures regarding compliance with laws and regulations. As the Company is regulated, our assessment of risks involved gaining an understanding of the control environment including the entity's procedures for complying with regulatory requirements.
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.
Firstly, 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.
Secondly, the Company is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation. We identified the following areas as those most likely to have such an effect: anti-bribery, and certain aspects of company legislation recognising the financial and regulated nature of the Company's activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the Directors and other management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or regulation
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 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 fraud, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.
6. We have nothing to report on the other information in the Annual Report
The Directors are responsible for the other information presented in the Annual Report together with 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.
7. 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 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.
8. Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 5, 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 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 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 .
9. 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.
Richard Rawstron (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London E14 5GL
27 April 2021
Statement of Comprehensive Income
For the year ended 31 December 2020
2020 2019 Note GBP GBP ------------------------------------------- ----- ------------ ------------ Interest income 250,033 767,887 ------------------------------------------- ----- ------------ ------------ Interest expense (234,068) (756,228) ------------------------------------------- ----- ------------ ------------ Net interest income 15,965 11,659 ------------------------------------------- ----- ------------ ------------ Revaluation of loan to parent undertaking 6 6,352,797 5,431,046 ------------------------------------------- ----- ------------ ------------ Revaluation of debt securities in issue 11 (6,342,224) (5,440,409) ------------------------------------------- ----- ------------ ------------ Foreign exchange translation profits 1,198 (2,471) ------------------------------------------- ----- ------------ ------------ Profit before tax 27,736 (175) ------------------------------------------- ----- ------------ ------------ Taxation 5 (11,114) (153) ------------------------------------------- ----- ------------ ------------ Profit for the financial year 16,622 (328) ------------------------------------------- ----- ------------ ------------ Other comprehensive income - - ------------------------------------------- ----- ------------ ------------ Total comprehensive income for the financial year 16,622 (328) ------------------------------------------- ----- ------------ ------------
All amounts are in respect of continuing activities.
Balance Sheet
At 31 December 2020
2020 2020 2019 2019 Note GBP GBP GBP GBP ---------------------------- -------- ---------- -------------- --------- -------------- Non-current assets Loan to parent undertaking 6 110,973,131 104,620,334 --------------------------------- --- ---------- -------------- --------- -------------- Current assets --------------------------------- --- ---------- -------------- --------- -------------- Cash and cash equivalents 8 245,750 230,368 --------------------------------- --- ---------- -------------- --------- -------------- Other financial assets 7 2,023 49,713 --------------------------------- --- ---------- -------------- --------- -------------- 247,773 280,081 --------------------------------- --- ---------- -------------- --------- -------------- Current liabilities Current tax liability (5,270) (1,746) --------------------------------- --- ---------- -------------- --------- -------------- Deferred tax liability 9 (38,442) (32,598) --------------------------------- --- ---------- -------------- --------- -------------- Other financial liabilities 10 - (47,725) --------------------------------- --- ---------- -------------- --------- -------------- Net current assets 204,061 198,012 --------------------------------- --- ---------- -------------- --------- -------------- Total assets less current liabilities 111,177,192 104,818,346 -------------------------------------------------- -------------- --------- -------------- Non-current liabilities Subordinated Guaranteed Notes 11 (110,770,808) (104,428,584) --------------------------------- ---- --------- -------------- --------- -------------- Net assets 406,384 389,762 --------------------------------- ---- --------- -------------- --------- -------------- Shareholders' equity Share capital 13 100,000 100,000 --------------------------------- ---- --------- -------------- --------- -------------- Retained earnings 306,384 289,762 --------------------------------- ---- --------- -------------- --------- -------------- Total shareholders' equity 406,384 389,762 --------------------------------- ---- --------- -------------- --------- --------------
Approved by the Board of Directors and signed on its behalf on 27 April 2021 by:
Peter Barbour, Director
Statement of Changes in Equity
For the year ended 31 December 2020
Share Retained Total Capital Earnings Equity GBP GBP GBP -------------------------------- --------- ---------- -------- At 31 December 2019 100,000 289,762 389,762 -------------------------------- --------- ---------- -------- Total comprehensive income for the financial year - 16,622 16,622 -------------------------------- --------- ---------- -------- At 31 December 2020 100,000 306,384 406,384 -------------------------------- --------- ---------- -------- At 31 December 2018 100,000 290,090 390,090 -------------------------------- --------- ---------- -------- Total comprehensive income for the financial year - (328) (328) -------------------------------- --------- ---------- -------- At 31 December 2019 100,000 289,762 389,762 -------------------------------- --------- ---------- --------
Cash Flow Statement
For the year ended 31 December 2020
2020 2019 Note GBP GBP ------------------------------------------- ----- ------------ ------------ Cash flow from operating activities Net profit/(loss) for the financial year 16,622 (328) ------------------------------------------- ----- ------------ ------------ Tax charge 11,114 153 ------------------------------------------- ----- ------------ ------------ Operating profit before changes in working capital and provisions 27,736 (175) ------------------------------------------- ----- ------------ ------------ Fair value movements of loans (6,352,797) (5,431,046) ------------------------------------------- ----- ------------ ------------ Fair value movements of debt securities 6,342,224 5,440,409 ------------------------------------------- ----- ------------ ------------ Cash from operations 17,163 9,188 ------------------------------------------- ----- ------------ ------------ Taxation paid (1,746) (2,451) ------------------------------------------- ----- ------------ ------------ Net decrease in debtors 47,690 202,648 ------------------------------------------- ----- ------------ ------------ Net decrease in financial liabilities (47,725) (202,550) ------------------------------------------- ----- ------------ ------------ Net cash from operating activities 15,382 6,737
------------------------------------------- ----- ------------ ------------ Net increase in cash and cash equivalents 15,382 6,835 ------------------------------------------- ----- ------------ ------------ Cash and cash equivalents at beginning of year 230,368 223,533 ------------------------------------------- ----- ------------ ------------ Cash and cash equivalents at end of year 8 245,750 230,368 ------------------------------------------- ----- ------------ ------------
Interest receipts and payments during the year were as follows:
2020 2019 GBP GBP ------------------------------------------- -------- -------- Interest received from parent undertaking 297,723 970,535 -------------------------------------------- -------- -------- Interest paid to note holders 281,793 958,778 -------------------------------------------- -------- --------
Notes to the Financial Statements
(forming part of the Financial Statements)
For the year ended 31 December 2020
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 accounting standards in conformity with the requirements of the Companies Act 2006 (adopted "IFRS").
Functional and presentation currency
These financial statements are presented in sterling, which is the Company's functional currency.
Going concern
Management has performed an assessment to determine whether there are any material uncertainties that could cast significant doubt on the ability of the Company to continue as a going concern, including the impact of COVID-19. No significant issues have been noted. In reaching this conclusion, management considered:
- The financial impact of the uncertainty on the Company's balance sheet; - The Company's liquidity position based on current and projected cash resources. The liquidity position has been assessed taking into account the forecast liquidity of N.M. Rothschild & Sons Limited ("NMR") and its ability to continue to pay the interest on the intercompany loan provided by the Company. This included severe but plausible downside scenarios for NMR as part of their assessment including scenarios with a significant reduction in revenues; and - The operational resilience with respect to the impact of the pandemic on existing IT and infrastructure.
Based on the above assessment of the Company's financial position, the Directors have concluded that the Company has adequate resources to continue in operational existence for the foreseeable future (for a period of at least twelve months after the date that the financial statements are signed). Accordingly, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
Standards affecting the financial statements
There were no new standards or amendments to standards that have been applied in the financial statements for the year ended 31 December 2020.
Future accounting policies
A number of new standards, amendments to standards and interpretations are effective for accounting periods ending after 31 December 2020 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 income and expense
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.
c. 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.
d. 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.
e. 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.
f. Capital management
The Company is not subject to any externally imposed capital requirements.
g. 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 and are initially recorded at fair value with any subsequent movement in fair value being recognised in the income statement.
ii. Financial liabilities
Subordinated Guaranteed Notes 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.
h. 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 GBP12,500 (2019: GBP7,500). 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 (2019: GBPnil).
5. Taxation 2020 2019 GBP GBP ----------------------------------------------- ------- -------- Current tax 5,270 1,745 ----------------------------------------------- ------- -------- Deferred tax 5,844 (1,592) ----------------------------------------------- ------- -------- Total tax 11,114 153 ----------------------------------------------- ------- --------
The tax charge can be explained as follows:
2020 2019 Note GBP GBP --------------------------------------- ----- ------- ------ Profit/(loss) before tax 27,735 (175) --------------------------------------- ----- ------- ------ United Kingdom corporation tax charge at 19% 5,270 (33) --------------------------------------- ----- ------- ------ Deferred tax charge 2,009 - --------------------------------------- ----- ------- ------ Impact on deferred tax of corporation tax change 9 3,835 187 --------------------------------------- ----- ------- ------ Prior year adjustments - (1) --------------------------------------- ----- ------- ------ Total tax 11,114 153 --------------------------------------- ----- ------- ------ 6. Non-Current Assets: Loan to Parent Undertaking 2020 2019 GBP GBP ------------------------ ------------ ------------ At beginning of period 104,620,334 99,189,288 ------------------------ ------------ ------------ Fair value movements 6,352,797 5,431,046 ------------------------ ------------ ------------ At end of period 110,973,131 104,620,334 ------------------------ ------------ ------------ Due In 5 years or more 110,973,131 104,620,334 ------------------------ ------------ ------------
In accordance with the business model assessment under IFRS 9, the loan to parent undertaking is a non-equity financial asset that doesn't meet SPPI requirements and has been classified at Fair Value Through Profit or Loss (FVTPL). The fair value of the EUR150,000,000 loan as at 31 December 2020 was GBP110,973,131 (2019: GBP104,620,334). On an amortised cost basis, the value of the loan at 31 December 2020 would be GBP134,882,343 (2019: GBP127,833,646). 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 maturity matches that of the subordinated guaranteed notes.
The effective interest rate on the above loan at 31 December 2020 was 0.01% (2019: 0.25%).
7. Current Assets: Other Financial Assets 2020 2019 GBP GBP ------------------------------------- -------- --------- Amounts owed by parent undertaking: Interest receivable 2,023 49,713 ------------------------------------- -------- --------- 8. Cash and Cash Equivalents
At the year end the Company held cash of GBP245,750 (2019: GBP230,368) at the parent undertaking. Of this balance, GBP211,543 was held in a sterling account (2018: GBP213,288). The equivalent of GBP34,207 (2019: GBP17,080) was held in a euro account. The effective interest rate at 31 December 2020 was 0.0% (2019: 0.0%).
9. Deferred Income Taxes 2020 2019 GBP GBP --------------------------------------- --------- --------- At beginning of period (32,598) (34,190) --------------------------------------- --------- --------- Recognised in income (Charge)/credit (2,009) 1,779 --------------------------------------- --------- --------- Impact on deferred tax of corporation tax change (3,835) (187) --------------------------------------- --------- --------- At end of period (38,442) (32,598) --------------------------------------- --------- ---------
Deferred tax assets less liabilities are attributable to the following items:
2020 2019 GBP GBP --------------------------------------- ------------ ------------ Fair value of intra group loans 4,542,758 3,946,263 --------------------------------------- ------------ ------------ Fair value of subordinated guaranteed notes in issue (4,581,200) (3,978,861) --------------------------------------- ------------ ------------ (38,442) (32,598) --------------------------------------- ------------ ------------
Both the intra-group loans and subordinated guaranteed notes in issue are taxed on an amortised cost basis of accounting and accordingly taxable/deductible temporary differences arise following the adoption of IFRS 9. Deferred tax is provided using rates that have been substantively enacted at the balance sheet date and that are expected to apply when the temporary difference is realised. The current UK corporation tax rate is 19 per cent.
In the 11 March 2020 Budget, it was announced that the UK tax rate will remain at the current 19% and not reduce to 17% from 1 April 2020.
10. Current Liabilities: Other Financial Liabilities
2019 2019 GBP GBP ------------------ ------ ------- Interest payable - 47,725 ------------------ ------ -------
11. Subordinated Guaranteed Notes
2020 2019 GBP GBP ------------------------ -------------- -------------- At beginning of period 104,428,584 98,988,175 ------------------------ -------------- -------------- Fair value movements 6,342,224 5,440,409 ------------------------ -------------- -------------- At end of period 110,770,808 104,428,584 ------------------------ -------------- -------------- Repayable In 5 years or more 110,770,808 104,428,584 ------------------------ -------------- --------------
The Company has elected to fair value through P&L the subordinated guaranteed notes, which as at 31 December 2020 was GBP110,770,808 (2019: GBP104,428,584), to significantly reduce the accounting mismatch from the corresponding loan to group undertaking which is classified as fair value through P&L. On an amortised cost basis, the value of the subordinated guaranteed notes in issue at 31 December 2020 would be GBP134,882,343 (2019: 127,833,646). 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 2020 was 0% (2019: 0.24%).
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 2020 GBP GBP GBP GBP GBP GBP ----------------------- ------ --------- -------- --------- ----------- ----------- Perpetual subordinated notes - - - - 134,882,383 134,882,383 ----------------------- ------ --------- -------- --------- ----------- ----------- 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 2019 GBP GBP GBP GBP GBP GBP ----------------------- ------ --------- -------- --------- ----------- ----------- Perpetual subordinated notes - 76,700 230,101 1,227,203 127,833,646 129,367,650 ----------------------- ------ --------- -------- --------- ----------- -----------
13. Share Capital
2020 2019 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:
2020 2019 GBP GBP ------------------------------------------------- ------------ ------------ Cash and cash equivalents at parent undertaking 245,750 230,368 ------------------------------------------------- ------------ ------------ Accrued interest receivable from parent undertaking 2,023 49,713 ------------------------------------------------- ------------ ------------ Loans to parent undertaking - at fair value 110,973,131 104,620,334 ------------------------------------------------- ------------ ------------
Amounts recognised in the statement of comprehensive income in respect of related party transactions were as follows:
2020 2019 GBP GBP ----------------------------------------- -------- -------- Interest income from parent undertaking 250,033 767,887 ----------------------------------------- -------- --------
There were no loans made to Directors during the year (2019: none) and no balances outstanding at the year-end (2019: 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 (2019: 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.
27 April 2021
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April 27, 2021 12:49 ET (16:49 GMT)
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