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85QT Sg Issuer 31

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Broadgate Financing PLC Annual Financial Report (4733O)

17/05/2018 2:58pm

UK Regulatory


Sg Issuer 31 (LSE:85QT)
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TIDM85QT

RNS Number : 4733O

Broadgate Financing PLC

17 May 2018

The Annual Report and Accounts for the year ended 31 March 2018, attached below in accordance with DTR 6.3.5R, has been submitted to the Financial Conduct Authority through the National Storage Mechanism and will shortly be available for inspection at: http://www.morningstar.co.uk/uk/NSM

The Annual Report and Accounts are also available at: http://www.britishland.com/investors/strategic-partnerships/broadgate-financing-plc

For a printer friendly version of the Annual Report and Accounts, please follow link below:

http://www.rns-pdf.londonstockexchange.com/rns/4733O_-2018-5-17.pdf

Broadgate Financing PLC

Annual Report and Accounts

Year ended 31 March 2018

Company number: 05316365

Strategic Report for the Year Ended 31 March 2018

The directors present their strategic report for the year ended 31 March 2018.

Business review and principal activities

Broadgate Financing PLC ("the company") is a wholly owned subsidiary of Broadgate Property Holdings Limited and operates as a constituent of Broadgate REIT Limited group of companies ("the group"). Broadgate REIT Limited operates as a joint venture between Euro Bluebell LLP, an affiliate of GIC, Singapore's soverign wealth fund, and BL Bluebutton 2014 Limited, a wholly owned subsidiary of The British Land Company PLC.

The company's principal activity is to provide funding to fellow subsidiaries within the group.

As shown in the company's Profit and Loss Account on page 10, the company has no turnover and this has remained consistent with the prior year. Profit on ordinary activities before taxation is GBP6,014 compared to a profit on ordinary activities before taxation of GBP7,020 in the prior year.

Dividends of GBPnil (2017: GBPnil) were paid in the year.

The Balance Sheet on page 12 shows that the company's financial position at the year end has, in net liability terms, decreased compared with the prior year, predominantly as a result of deriviative valuation movements.

The expected future developments of the company are determined by the strategy of the group. There are no future developments outside of the company's current operations planned.

Key performance indicators

The directors measure how the group, of which this company is a member, is delivering its strategy through the key performance indicators.

The directors consider the primary measure of performance of the group to be net asset value.

This company is part of a large property investment group. As such, the fundamental underlying risks for this company are those of the property group. The key risks of this group are the performance of the properties and tenant default, as this ensures necessary funds are available to repay securitisation interest and principal, and the credit risk of counterparties upon which the group is dependent for fixing its interest rate exposure and for holding cash deposits. These risks are mitigated by preference for tenants with strong covenants on long leases and by using highly rated counterparties and monitoring those ratings.

These risks have high visibility to senior executives and are considered and managed on a continuous basis. Executives use their knowledge and experience to knowingly accept a measured degree of market risk.

The group's preference for prime assets and their secure long term contracted rental income, primarily with upward only rent review clauses, presents lower risks than many other property portfolios.

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. In order to manage this risk, management regularly monitors the credit rating of credit counterparties and monitors all amounts that are owed to the company.

Liquidity risk is the risk that the entity will encounter difficulty in raising funds to meet commitments associated with financial liabilities. This risk is managed through day to day monitoring of future cash flow requirements to ensure that the company has enough resources to repay all future liabilities as they fall due.

The company's activities expose it primarily to interest rate risk. The company uses interest rate swap contracts to hedge these exposures. The company does not use derivative financial instruments for speculative purposes.

The company finances its operations by a mixture of equity and public debt issues. The company borrows in Sterling at both fixed and floating rates of interest, using interest rate derivatives to hedge the interest rate risk on variable rate debt.

The company holds three derivatives as at 31 March 2018 (2017: three) to fix the LIBOR rate on external debt at approximately 4.85% (2017: 4.85%). The fair value of interest rate derivatives at the year end is a liability of GBP37.5m (2017: GBP51.3m liability).

Approved by the Board on 16 May 2018 and signed on its behalf by:

H. Shah

Director

Directors' Report for the Year Ended 31 March 2018

The directors present their report and the financial statements for the year ended 31 March 2018.

Directors of the company

The directors, who held office during the year, and up to the date of signing the financial statements, were as follows:

T Roberts

H Shah

C Forshaw (resigned 5 April 2017)

L Bell (resigned 19 January 2018)

D Lockyer

Directors' responsibilities statement

The directors acknowledge their responsibilities for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 101 'Reduced Disclosure Framework' ('FRS 101'). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

 
--  select suitable accounting policies and apply 
     them consistently; 
--  make judgements and accounting estimates that 
     are reasonable and prudent; 
--  state whether FRS 101 has been followed, subject 
     to any material departures disclosed and explained 
     in the financial statements; and 
--  prepare the financial statements on the going 
     concern basis unless it is inappropriate to 
     presume that the company will continue in business. 
 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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

The company has indemnified its current directors. The indemnity arrangements are qualifying indemnity provisions under the Companies Act 2006 and are currently in force at the date of this Annual Report.

Environmental matters

The company recognises the importance of its environmental responsibilities, monitors its impact on the environment, and designs and implements policies to reduce any damage that might be caused by the company's activities. The company operates in accordance with best practice policies and initiatives designed to minimise the company's impact on the environment including the safe disposal of manufacturing waste, recycling and reducing energy consumption.

Going concern

The directors consider the company to be a going concern and the accounts are prepared on this basis. Details of this are shown in note 2 of the financial statements.

Subsequent Events

Details of subsequent events since the Balance Sheet date, if any, are contained in note 17.

Disclosure of information to the auditors

Each director has taken steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the company's auditors are aware of that information. The directors confirm that there is no relevant information that they know of and of which they know the auditors are unaware.

Reappointment of auditors

The auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in office and a resolution concerning their re-appointment will be proposed at the next Board Meeting.

Approved by the Board on 16 May 2018 and signed on its behalf by:

H. Shah

Director

Independent Auditors' Report to the Members of Broadgate Financing PLC

Report on the audit of the financial statements

Opinion

In our opinion, Broadgate Financing PLC's financial statements:

 
--  give a true and fair view of the state of the 
     company's affairs as at 31 March 2018 and of 
     its profit for the year then ended; 
--  have been properly prepared in accordance with 
     United Kingdom Generally Accepted Accounting 
     Practice (United Kingdom Accounting Standards, 
     comprising FRS 101 "Reduced Disclosure Framework", 
     and applicable law); and 
--  have been prepared in accordance with the requirements 
     of the Companies Act 2006. 
 

We have audited the financial statements, included within the Annual Report and Financial Statements (the "Annual Report"), which comprise: the balance sheet as at 31 March 2018; the profit and loss account, the statement of comprehensive income, the statement of changes in equity for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies.

Our opinion is consistent with our reporting to the Directors.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We remained independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC's Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC's Ethical Standard were not provided to the company.

We have provided no non-audit services to the company in the period from 1 April 2017 to 31 March 2018.

Our audit approach

Overview

Materiality

 
--  Overall materiality: GBP17,800,000 (2017: GBP18,300,000), 
     based on 1% of total assets. 
 

Audit Scope

 
--  Our 2018 audit was planned and executed having 
     regard to the fact that the company's operations 
     were largely unchanged in nature from the previous 
     year. Additionally, there have been no significant 
     changes to the accounting standards relevant 
     to the company. In light of this, our approach 
     to the audit in terms of scoping and areas 
     of focus was largely unchanged. 
 

Key Audit Matters

 
--  We have no key audit matters to report. 
     The scope of our audit 
 
     As part of designing our audit, we determined 
     materiality and assessed the risks of material 
     misstatement in the financial statements. In 
     particular, we looked at where the directors 
     made subjective judgements, for example in 
     respect of significant accounting estimates 
     that involved making assumptions and considering 
     future events that are inherently uncertain. 
 
     We gained an understanding of the legal and 
     regulatory framework applicable to the company 
     and the industry in which it operates, and 
     considered the risk of acts by the company 
     which were contrary to applicable laws and 
     regulations, including fraud. We designed audit 
     procedures to respond to the risk, recognising 
     that the risk of not detecting a material misstatement 
     due to fraud is higher than the risk of not 
     detecting one resulting from error, as fraud 
     may involve deliberate concealment by, for 
     example, forgery or intentional misrepresentations, 
     or through collusion. We focused on laws and 
     regulations that could give rise to a material 
     misstatement in the company's financial statements, 
     including, but not limited to, the Companies 
     Act 2006 and the Listing Rules. Our tests included, 
     but were not limited to, review of the financial 
     statement disclosures to underlying supporting 
     documentation and enquiries of management. 
     There are inherent limitations in the audit 
     procedures described above and the further 
     removed non-compliance with laws and regulations 
     is from the events and transactions reflected 
     in the financial statements, the less likely 
     we would become aware of it. 
 
     We did not identify any key audit matters relating 
     to irregularities, including fraud. As in all 
     of our audits we also addressed the risk of 
     management override of internal controls, including 
     testing journals and evaluating whether there 
     was evidence of bias by the directors that 
     represented a risk of material misstatement 
     due to fraud. 
 
     Key audit matters 
 
     Key audit matters are those matters that, in 
     the auditors' professional judgement, were 
     of most significance in the audit of the financial 
     statements of the current period and include 
     the most significant assessed risks of material 
     misstatement (whether or not due to fraud) 
     identified by the auditors, including those 
     which had the greatest effect on: the overall 
     audit strategy; the allocation of resources 
     in the audit; and directing the efforts of 
     the engagement team. We determined that there 
     were no key audit matters applicable to the 
     company to communicate in our report. 
 
     How we tailored the audit scope 
 
     We tailored the scope of our audit to ensure 
     that we performed enough work to be able to 
     give an opinion on the financial statements 
     as a whole, taking into account the structure 
     of the company, the accounting processes and 
     controls, and the industry in which it operates. 
 
     In establishing the overall approach to our 
     audit, we assessed the risk of material misstatement, 
     taking into account the nature, likelihood 
     and potential magnitude of any misstatement. 
     Following this assessment, we applied professional 
     judgment to determine the extent of testing 
     required over each balance in the financial 
     statements. 
 
     Materiality 
 
     The scope of our audit was influenced by our 
     application of materiality. We set certain 
     quantitative thresholds for materiality. These, 
     together with qualitative considerations, helped 
     us to determine the scope of our audit and 
     the nature, timing and extent of our audit 
     procedures on the individual financial statement 
     line items and disclosures and in evaluating 
     the effect of misstatements, both individually 
     and in aggregate on the financial statements 
     as a whole. 
 
     Based on our professional judgement, we determined 
     materiality for the financial statements as 
     a whole as follows:Overall materiality          GBP17,800,000 (2017: GBP18,300,000). 
     -----------------------      ------------------------------------ 
     How we determined it         1% of total assets 
     -----------------------      ------------------------------------ 
     Rationale for benchmark      We believe that total 
      applied                      assets is the primary 
                                   measure used by the shareholders 
                                   in assessing the performance 
                                   of the entity, and is 
                                   a generally accepted auditing 
                                   benchmark. 
 
     We agreed with those charged with governance 
     that we would report to them misstatements 
     identified during our audit above GBP900,000 
     (2017: GBP900,000) as well as misstatements 
     below that amount that, in our view, warranted 
     reporting for qualitative reasons. 
 
     Conclusions relating to going concern 
 
     We have nothing to report in respect of the 
     following matters in relation to which ISAs 
     (UK) require us to report to you when:--  the directors' use of the going concern basis 
          of accounting in the preparation of the financial 
          statements is not appropriate; or 
     --  the directors have not disclosed in the financial 
          statements any identified material uncertainties 
          that may cast significant doubt about the company's 
          ability to continue to adopt the going concern 
          basis of accounting for a period of at least 
          twelve months from the date when the financial 
          statements are authorised for issue 
 
     However, because not all future events or conditions 
     can be predicted, this statement is not a guarantee 
     as to the company's ability to continue as 
     a going concern. 
 
     Reporting on other information 
 
 
     The other information comprises all of the 
     information in the Annual Report other than 
     the financial statements and our auditors' 
     report thereon. The directors are responsible 
     for the other information. Our opinion on the 
     financial statements does not cover the other 
     information and, accordingly, we do not express 
     an audit opinion or, except to the extent otherwise 
     explicitly stated in this report, any form 
     of assurance thereon. 
 
 
     In connection with our audit of the financial 
     statements, our responsibility is to read the 
     other information and, in doing so, consider 
     whether the other information is materially 
     inconsistent with the financial statements 
     or our knowledge obtained in the audit, or 
     otherwise appears to be materially misstated. 
     If we identify an apparent material inconsistency 
     or material misstatement, we are required to 
     perform procedures to conclude whether there 
     is a material misstatement of the financial 
     statements or a material misstatement of the 
     other information. If, based on the work we 
     have performed, we conclude that there is a 
     material misstatement of this other information, 
     we are required to report that fact. We have 
     nothing to report based on these responsibilities. 
     With respect to the Strategic Report and Directors' 
     Report, we also considered whether the disclosures 
     required by the UK Companies Act 2006 have 
     been included. 
     Based on the responsibilities described above 
     and our work undertaken in the course of the 
     audit, ISAs (UK) require us also to report 
     certain opinions and matters as described below. 
     Strategic Report and Directors' Report 
 
     In our opinion, based on the work undertaken 
     in the course of the audit, the information 
     given in the Strategic Report and Directors' 
     Report for the year ended 31 March 2018 is 
     consistent with the financial statements and 
     has been prepared in accordance with applicable 
     legal requirements. 
 
     In light of the knowledge and understanding 
     of the company and its environment obtained 
     in the course of the audit, we did not identify 
     any material misstatements in the Strategic 
     Report and Directors' Report. 
 
     Responsibilities for the financial statements 
     and the audit 
 
     Responsibilities of the directors for the financial 
     statements 
 
     As explained more fully in the Directors' responsibilities 
     statement set out on page 3, the directors 
     are responsible for the preparation of the 
     financial statements in accordance with the 
     applicable framework and for being satisfied 
     that they give a true and fair view. The directors 
     are also responsible for such internal control 
     as they determine is necessary to enable the 
     preparation of financial statements that are 
     free from material misstatement, whether due 
     to fraud or error. 
 
     In preparing the financial statements, the 
     directors are responsible for assessing the 
     company's ability to continue as a going concern, 
     disclosing as applicable, matters related to 
     going concern and using the going concern basis 
     of accounting unless the directors either intend 
     to liquidate the company or to cease operations, 
     or have no realistic alternative but to do 
     so. 
 
     Auditors' responsibilities for the audit of 
     the financial statements 
 
     Our objectives are to obtain reasonable assurance 
     about whether the financial statements as a 
     whole are free from material misstatement, 
     whether due to fraud or error, and to issue 
     an auditors' report that includes our opinion. 
     Reasonable assurance is a high level of assurance, 
     but is not a guarantee that an audit conducted 
     in accordance with ISAs (UK) will always detect 
     a material misstatement when it exists. Misstatements 
     can arise from fraud or error and are considered 
     material if, individually or in the aggregate, 
     they could reasonably be expected to influence 
     the economic decisions of users taken on the 
     basis of these financial statements. 
 
     A further description of our responsibilities 
     for the audit of the financial statements is 
     located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities. 
     This description forms part of our auditors' 
     report. 
 
     Use of this report 
 
     This report, including the opinions, has been 
     prepared for and only for the company's members 
     as a body in accordance with Chapter 3 of Part 
     16 of the Companies Act 2006 and for no other 
     purpose. We do not, in giving these opinions, 
     accept or assume responsibility for any other 
     purpose or to any other person to whom this 
     report is shown or into whose hands it may 
     come save where expressly agreed by our prior 
     consent in writing. 
 
     Other required reporting 
 
     Companies Act 2006 exception reporting 
 
     Under the Companies Act 2006 we are required 
     to report to you if, in our opinion: 
     --  we have not received all the information and 
          explanations we require for our audit; or 
     --  adequate accounting records have not been kept 
          by the company, or returns adequate for our 
          audit have not been received from branches 
          not visited by us; or 
     --  certain disclosures of directors' remuneration 
          specified by law are not made; or 
     --  the financial statements are not in agreement 
          with the accounting records and returns. 
 
     Appointment 
 
     Following the recommendation of those charged 
     with governance, we were appointed by the directors 
     on 27 March 2015 to audit the financial statements 
     for the year ended 31 March 2015 and subsequent 
     financial periods. The period of total uninterrupted 
     engagement is 4 years, covering the years ended 
     31 March 2015 to 31 March 2018. 
 
 
     ...................................... 
     John Waters (Senior Statutory Auditor) 
     For and on behalf of PricewaterhouseCoopers 
     LLP 
     Chartered Accountants and Statutory Auditors 
     London 
     Date: 16 May 2018. 
 

Profit and Loss Account for the Year Ended 31 March 2018

 
                                                2018          2017 
                                  Note           GBP           GBP 
Turnover                                           -             - 
Administrative expenses                      (1,000)       (1,000) 
                                        ------------  ------------ 
Operating loss                               (1,000)       (1,000) 
Loss on ordinary activities 
 before interest and taxation                (1,000)       (1,000) 
Interest receivable and similar 
 income                           4       80,337,864    83,092,579 
Interest payable and similar 
 expenses                         5     (80,330,850)  (83,084,559) 
                                        ------------  ------------ 
Profit on ordinary activities 
 before taxation                               6,014         7,020 
Tax on profit on ordinary 
 activities                       8          (1,142)       (1,404) 
                                        ------------  ------------ 
Profit for the year                            4,872         5,616 
                                        ============  ============ 
 

Turnover and results were derived from continuing operations within the United Kingdom. The company has only one class of business, that of to provide funding to fellow subsidiaries within the group.

Statement of Comprehensive Income for the Year Ended 31 March 2018

 
                                        2018       2017 
                                         GBP        GBP 
Profit for the year                    4,872      5,616 
Items that may be reclassified 
 subsequently to profit or loss 
Gain on cash flow hedges (net)    13,352,923  6,696,193 
                                  ----------  --------- 
Total comprehensive income for 
 the year                         13,357,795  6,701,809 
                                  ==========  ========= 
 

Broadgate Financing PLC

(Registration number: 05316365)

Balance Sheet as at 31 March 2018

 
                                             31 March         31 March 
                                                 2018             2017 
                                Note              GBP              GBP 
Current assets 
Debtors due within one year     9          70,521,068       70,370,822 
Cash at bank and in hand        10        200,130,844      200,130,884 
Debtors due after more than 
 one year                       9       1,513,252,868    1,565,309,187 
                                      ---------------  --------------- 
                                        1,783,904,780    1,835,810,893 
Creditors due within one year   11       (82,989,922)     (82,382,840) 
                                      ---------------  --------------- 
Total assets less current 
 liabilities                            1,700,914,858    1,753,428,053 
Loans and borrowings            12    (1,735,715,247)  (1,801,586,237) 
                                      ---------------  --------------- 
Net liabilities                          (34,800,389)     (48,158,184) 
                                      ===============  =============== 
Capital and reserves 
Share capital                   13             12,500           12,500 
Cash flow hedging reserve                (35,216,473)     (48,569,396) 
Profit and loss account                       403,584          398,712 
                                      ---------------  --------------- 
Shareholders' deficit                    (34,800,389)     (48,158,184) 
                                      ===============  =============== 
 

Approved by the Board on 16 May 2018 and signed on its behalf by:

H. Shah

Director

Statement of Changes in Equity for the Year Ended 31 March 2018

 
                                         Cash flow     Profit 
                                           hedging   and loss 
                       Share capital       reserve    account         Total 
                                 GBP           GBP        GBP           GBP 
Balance at 1 
 April 2016                   12,500  (55,265,589)    393,096  (54,859,993) 
Profit for the 
 year                              -             -      5,616         5,616 
Derivative valuation 
 movements on 
 cash flow hedges                  -     6,696,193          -     6,696,193 
                       -------------  ------------  ---------  ------------ 
Total comprehensive 
 income for the 
 year                              -     6,696,193      5,616     6,701,809 
                       -------------  ------------  ---------  ------------ 
Balance at 31 
 March 2017                   12,500  (48,569,396)    398,712  (48,158,184) 
                       =============  ============  =========  ============ 
 
 
At 1 April 2017        12,500  (48,569,396)  398,712  (48,158,184) 
Profit for the 
 year                       -             -    4,872         4,872 
Derivative valuation 
 movements on 
 cash flow hedges           -    13,352,923        -    13,352,923 
                       ------  ------------  -------  ------------ 
Total comprehensive 
 income for the 
 year                       -    13,352,923    4,872    13,357,795 
                       ------  ------------  -------  ------------ 
Balance at 31 
 March 2018            12,500  (35,216,473)  403,584  (34,800,389) 
                       ======  ============  =======  ============ 
 

Notes to the Financial Statements for the Year Ended 31 March 2018

 
1  General information 
 

The company is a private company limited by share capital, incorporated and domiciled in United Kingdom.

The address of its registered office is:

York House

45 Seymour Street

London

W1H 7LX

 
2  Accounting policies 
 

Summary of significant accounting policies and key accounting estimates

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparation

These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework ("FRS 101").

In preparing these financial statements, the company applies the recognition, measurement and disclosure requirements of International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs"), but makes amendments where necessary in order to comply with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.

The financial statements have been prepared under the historical cost convention, modified to include the revaluation of derivative financial instruments. Historical cost is generally based on the fair value of the consideration given in exchange for the assets.

These financial statements are separate financial statements.

Summary of disclosure exemptions

The company has taken advantage of the following disclosure exemptions under FRS 101:

 
(a)  The requirements of IAS 1 to provide a Balance 
      Sheet at the beginning of the year in the 
      event of a prior year adjustment; 
(b)  The requirements of IAS 1 to provide a Statement 
      of Cash flows for the year; 
(c)  The requirements of IAS 1 to provide a statement 
      of compliance with IFRS; 
(d)  The requirements of IAS 1 to disclose information 
      on the management of capital; 
(e)  The requirements of paragraphs 30 and 31 of 
      IAS 8 Accounting Policies, Changes in Accounting 
      Estimates and Errors to disclose new IFRS's 
      that have been issued but are not yet effective; 
(f)  The requirements in IAS 24 Related Party Disclosures 
      to disclose related party transactions entered 
      into between two or more members of a group, 
      provided that any subsidiary which is a party 
      to the transaction is wholly owned by such 
      a member; 
(g)  The requirements of paragraph 17 of IAS 24 
      Related Party Disclosures to disclose key 
      management personnel compensation; 
(h)  The requirements of IFRS 7 to disclose financial 
      instruments; and 
 
 
2    Accounting policies (continued) 
(i)    The requirements of paragraphs 91-99 of IFRS 
        13 Fair Value Measurement to disclose information 
        of fair value valuation techniques and inputs. 
 
 

Disclosure exemptions for subsidiaries are permitted where the relevant disclosure requirements are met in the consolidated financial statements. Where required, equivalent disclosures are given in the group accounts of Broadgate REIT Limited. The group accounts of Broadgate REIT Limited are available to the public and can be obtained as set out in note 18.

Going concern

The net liability position of the balance sheet at the year end is as a result of market swap rates being below the fixed rate payable on the company's interest rate swaps. This has had a detrimental effect on the fair value of the company's interest rate derivatives at the year end. The interest rate swaps fix the rate payable on the company's liabilities at a rate slightly below the interest on loans receivable. The change in mark to market is not envisaged to have an impact on the company's cash flow for the foreseeable future. Having reviewed the company's forecast working capital and cash flow requirements, in addition to making enquiries and examining areas which could give risk to financial exposure, the directors have a reasonable expectation that the company has adequate resources to continue its operations for at least twelve months after the signing date of these financial statements. As a result they continue to adopt the going concern basis in preparing the accounts.

Changes in accounting policy

None of the standards, interpretations and amendments effective for the first time from 1 April 2017 have had a material effect on the financial statements.

Taxation

Current tax is based on taxable profit for the year and is calculated using tax rates that have been enacted or substantively enacted. Taxable profit differs from net profit as reported in the Profit and Loss Account because it excludes items of income or expense that are not taxable (or tax deductible).

Deferred tax is provided on items that may become taxable at a later date, on the difference between the balance sheet value and tax base value, on an undiscounted basis.

 
2  Accounting policies (continued) 
 

Cash and cash equivalents

Cash and cash equivalents are limited to instruments to maturity of less than three months.

Financial assets

The company classifies all financial assets, with the exception of derivative financial instruments into the category Loans and Debtors. Loans and Debtors are initially measured at fair value including any transaction costs. They are subsequently measured at amortised cost using the effective interest rate method.

Foreign currencies

The company's financial statements are presented in pounds sterling, which is the functional currency of the company.

Financial liabilities - borrowings

Debt instruments are initially stated at their net proceeds on issue and subsequently at amortised cost. Finance charges including premiums payable on settlement or redemption and direct issue costs are spread over the period to redemption, using the effective interest method.

Derivative financial instruments

As defined by IAS39, cash flow hedges are carried at fair value in the balance sheet. Changes in the fair value of derivatives that are designated and qualify as effective cash flow hedges are recognised directly in the hedging reserve. Any ineffective portion is recognised in the profit and loss account.

Interest payable and receivable

Interest payable and receivable is recognised as incurred under the accruals concept. Interest payable includes financing charges which are spread over the period to redemption, using the effective interest method. Commitment fees on non-utilised facilities are also included within interest payable.

 
3  Significant accounting judgements and key sources 
    of estimation uncertainty 
 

Determining the carrying amount of some assets requires estimation of the effect of uncertain future events. The major sources of estimation uncertainty that have a significant risk of resulting in a material adjustment to the carrying amounts of assets are noted below.

Trade and other debtors

The company makes an estimate of the recoverable value of trade and other debtors. When assessing impairment of trade and other debtors, the Directors consider factors including the current credit rating of the debtor, the ageing profile of debtors and historical experience.

Fair value of interest rate derivatives

Interest rate derivatives have been valued by calculating the present value of expected future cash flows, using appropriate market discount rates, by an independent treasury advisor.

 
4                                  Interest receivable and similar income 
                                                   2018                 2017 
                                                    GBP                  GBP 
Interest income on bank deposits                501,274              721,470 
Interest receivable on amounts 
 owed by group companies                     79,836,590           82,371,109 
                                    -------------------  ------------------- 
                                             80,337,864           83,092,579 
                                    ===================  =================== 
 
 
 
5                                 Interest payable and similar expenses 
                                                           2018                          2017 
                                                            GBP                           GBP 
Interest on derivatives                              10,492,420                    11,849,755 
Interest payable on amounts due 
 to group companies                                      98,964                       164,402 
Interest payable on bonds and 
 borrowings                                          69,739,466                    71,070,402 
                                   ----------------------------  ---------------------------- 
                                                     80,330,850                    83,084,559 
                                   ============================  ============================ 
6                                 Auditors' remuneration 
                                   A notional charge of GBP7,820 (2017: GBP3,800) 
                                   is deemed payable to PricewaterhouseCoopers 
                                   LLP in respect of the audit of the financial 
                                   statements for the year ended 31 March 2018. 
                                   Actual amounts payable to PricewaterhouseCoopers 
                                   LLP are paid by Bluebutton Properties UK Limited. 
                                   Bluebutton Properties UK Limited is a holding 
                                   company within the group. 
                                   No non-audit fees (2017: GBPnil) were paid 
                                   to PricewaterhouseCoopers LLP.7  Staff costs 
 
                                   No director received any remuneration for services 
                                   to the company in either year. The remuneration 
                                   of the directors was borne by another company, 
                                   for which no apportionment or recharges were 
                                   made. 
                                   Average number of employees, excluding directors, 
                                   of the company during the year was nil (2017: 
                                   nil)8  Tax on profit on ordinary activities 
 
                                   Tax charged/(credited) in the profit and loss 
                                   account                      2018   2017 
                                                          GBP    GBP 
                                   Current taxation 
                                   UK corporation tax   1,142  1,404 
                                                        =====  ===== 
 
                                                                             2018     2017 
                                                                              GBP      GBP 
                                   Tax reconciliation 
                                   Profit on ordinary activities            6,014    7,020 
                                                                          -------  ------- 
                                   Tax on profit on ordinary activities 
                                    at UK corporation tax rate of 
                                    19% (2017 : 20%)                        1,142    1,404 
                                                                          =======  ======= 
                                   Income tax expense                     (1,142)  (1,404) 
                                                                          =======  ======= 
 
                                   A reduction in the UK corporation tax rate 
                                   from 19% to 17% (effective from 1 April 2020) 
                                   was substantially enacted on 6 September 2016. 
 
 
 
9                                  Debtors 
                                         31 March       31 March 
                                             2018           2017 
                                              GBP            GBP 
Amounts due from related parties       52,056,319     51,315,973 
Accrued income                         18,462,901     19,053,001 
Corporation tax asset                       1,848          1,848 
                                    -------------  ------------- 
                                       70,521,068     70,370,822 
                                    =============  ============= 
Debtors due after more than one 
 year 
Amounts owed by group companies 
 - Long term loans                  1,513,252,868  1,565,309,187 
                                    -------------  ------------- 
                                    1,513,252,868  1,565,309,187 
                                    =============  ============= 
 
 

The company's interest on outstanding debt is discussed in note 12 and applied to amounts owing from related parties in the same manner.

 
10                    Cash and cash equivalents 
                            31 March      31 March 
                                2018          2017 
                                 GBP           GBP 
Cash at bank                 130,844       130,884 
Short-term deposits      200,000,000   200,000,000 
                       -------------  ------------ 
                         200,130,844   200,130,884 
                       =============  ============ 
 
 
 
11                               Creditors due within one year 
                                         31 March        31 March 
                                             2018            2017 
                                              GBP             GBP 
Accruals                               16,215,169      16,334,375 
Amounts due to related parties         14,705,434      14,720,491 
Debenture Loans                        52,056,318      51,315,973 
Other creditors                            13,001          12,001 
                                  ---------------  -------------- 
                                       82,989,922      82,382,840 
                                  ===============  ============== 
 
 

Amounts due to related parties relate to amounts owed to group companies and are repayable on demand. There is no interest charged on these balances.

 
12                                     Loans and borrowings 
                                                 2018           2017 
                                                  GBP            GBP 
Loans 
Loans due 1 to 2 years                     52,842,563     52,056,319 
Loans due 2 to 5 years                    105,067,795    121,991,680 
Loans due after 5 years                 1,540,342,510  1,576,261,188 
Interest rate derivative liabilities       37,462,379     51,277,050 
                                        -------------  ------------- 
                                        1,735,715,247  1,801,586,237 
                                        =============  ============= 
 
 

Amounts due after five years include the term loan of GBP185m which represents a revolving liquidity facility with The Royal Bank Of Scotland PLC. The cash received is held on deposit.

Hedge accounting

The company uses interest rate swaps to hedge exposure to the variability in cash flows on floating rate debt. At 31 March 2018 the market value of these derivatives, which have been designated cash flow hedges under IAS39, is a liability of GBP37.5m (2017: GBP51.3m liability). The valuation movement reflects the increase in Sterling interest rates since the beginning of the year.

The Treasury Function

The company borrows in Sterling at both fixed and floating rates of interest, using interest rate derivatives to hedge the interest rate risk on variable rate debt.

The ineffectiveness recognised in the income statement on cash flow hedges in the year ended 31 March 2018 was GBPnil (2017: GBPnil). The table below summarises variable rate debt hedged at 31 March 2018, being the amounts pertaining to class A1, C1 and D bonds.

 
                                        2018         2017 
                                         GBP          GBP 
Variable rate debt 
Variable rate debt outstanding 
 after one year                  183,833,340  220,052,710 
Variable rate debt outstanding 
 after two years                 147,613,500  183,833,340 
Variable rate debt outstanding 
 after five years                 97,704,450  114,340,800 
 
 
                                                   2018           2017 
                                                    GBP            GBP 
Borrowings repayment analysis 
Borrowing repayments due within 
 one year                                    52,056,318     51,315,973 
Borrowing repayments due within 
 1-2 years                                   52,842,563     52,056,319 
Borrowing repayments due within 
 2-5 years                                  105,067,795    121,991,680 
                                          -------------  ------------- 
                                            209,966,676    225,363,972 
After 5 years                             1,540,342,510  1,576,261,188 
                                          -------------  ------------- 
Total borrowings                          1,750,309,186  1,801,625,160 
Fair value of interest rate derivatives      37,462,379     51,277,050 
                                          -------------  ------------- 
Gross debt                                1,787,771,565  1,852,902,210 
                                          =============  ============= 
 
 
                                           2018           2017 
                                            GBP            GBP 
Borrowings repayment analysis 
Class A1 floating rate bonds 
 due 2032                           163,636,200    177,272,550 
Class A2 4.949% bonds due 2031      200,680,830    212,899,050 
Class A3 4.851% bonds due 2033      175,000,000    175,000,000 
Class A4 4.821% bonds due 2036      400,000,000    400,000,000 
Class B 4.999% bonds due 2033       365,325,647    365,336,750 
Class C1 floating rate bonds 
 due 2022                            39,166,510     58,750,000 
Class C2 5.098% bonds due 2035      204,250,000    207,116,810 
Class D floating rate bonds due 
 2025                                17,250,000     20,250,000 
                                  -------------  ------------- 
Total secured bond borrowings     1,565,309,187  1,616,625,160 
 
 
                                                  2018           2017 
                                                   GBP            GBP 
Other borrowings 
Fair value of interest rate derivative 
 liabilities                                37,462,379     51,277,050 
Term loan                                  185,000,000    185,000,000 
                                         -------------  ------------- 
Total secured borrowings                 1,787,771,566  1,852,902,210 
                                         =============  ============= 
 

At 31 March 2018, taking into account the effect of derivatives, 100% (2017: 100%) of the bonds were fixed. The bonds amortise between 2005 to 2036, and are secured on properties of the group valued at GBP3,667m (2017: GBP3,481m) and cash of GBPnil (2017: GBPnil). Including derivatives, the weighted average interest rate of the bonds is 5.01% (2017: 5.02%). The weighted average maturity of the bonds is 10.8 years (2017: 11.4 years).

At 31 March 2018 the company was financed by GBP1,565m bonds (2017: GBP1,617m).

The fair values of the bonds have been established by obtaining quoted market prices from brokers. The derivatives have been valued by calculating the present value of future cash flows, using appropriate market discount rates, by an independent treasury advisor.

Except as detailed below, the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements are approximately equal to their fair values:

 
                                       2018           2017 
                                        GBP            GBP 
Secured bonds at fair value   1,883,259,680  1,970,850,805 
                              =============  ============= 
 

Risk Management

Capital risk management:

The company finances its operations by a mixture of equity and public debt issues to support the property strategy of the group.

The approach adopted has been to engage in debt financing with long term maturity dates and as such the bonds issued are due between 2022 and 2036. Including debt amortisation 86.0% (2017: 85.0%) of the total borrowings is due for payment after 5 years.

The company aims to ensure that potential debt providers understand the business and a transparent approach is adopted with lenders so they can understand the level of their exposure within the overall context of the group.

Details of bond covenants are outlined in the bonds Offering Circular, accessible via

http://www.britishland.com/investors/strategic-partnerships/broadgate-financing-plc.aspx.

Credit risk:

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The carrying amount of financial assets recorded in the financial statements represents the company's maximum exposure to credit risk without taking account of the value of any collateral obtained.

Cash and cash equivalents at 31 March 2018 amounted to GBP200m (2017: GBP200m) and are placed with European Financial institutions with BBB+ or better credit ratings. At 31 March 2018, prior to taking account of any offset arrangements, the largest combined credit exposure to a single counterparty arising from money market deposits and interest rate swaps was GBP100m (2017:GBP200m). This represents 5.61% (2017: 10.89%) of gross assets.

The company's principal credit risk relates to an intra-group loan to Broadgate (Funding) 2005 Limited. At 31 March 2018 this loan stood at GBP1,565m (2017: GBP1,617m). The purpose of this loan is to provide funding to fellow subsidiaries of the Broadgate REIT Limited group.

At 31 March 2018, the fair value of all interest rate derivatives which had a positive value was GBPnil (2017: GBPnil).

In order to manage this risk, management regularly reviews the credit rating of counterparties and monitors all amounts that are owed to the company.

Liquidity risk:

Liquidity risk is the risk that the entity will encounter difficulty in raising funds to meet commitments associated with financial liabilities. This risk is managed through day to day monitoring of future cash flow requirements to ensure that the company has enough resources to repay all future amounts outstanding.

Interest rate risk:

The company's activities expose it to interest rate risk. The company uses interest rate swap contracts to hedge these exposures. The company does not use derivative financial instruments for speculative purposes.

 
13  Share capital 
 

Allotted, called up and fully paid shares

 
                          31 March        31 March 
                              2018            2017 
                       No.     GBP     No.     GBP 
Ordinary shares 
 of GBP0.25 each    50,000  12,500  50,000  12,500 
 
14                 Capital commitments 
 
 

The total amount contracted for but not provided in the financial statements was GBPnil (2017: nil)

 
15  Contingent liabilities 
 

The company has no contingent liabilities as at 31 March 2018 of GBPnil (2017: GBPnil).

 
16  Related party transactions 
 

The company has taken advantage of the exemption granted to wholly owned subsidiaries not to disclose transactions with group companies under the provisions of FRS 101.

 
17  Subsequent events 
 

There have been no subsequent events since the year end.

 
18  Parent and ultimate parent undertaking 
 

The immediate parent company is Broadgate Property Holdings Limited.

The ultimate parent company is Broadgate REIT Limited. Broadgate REIT Limited operates as a joint venture between Euro Bluebell LLP, an affiliate of GIC, Singapore's sovereign wealth fund, and BL Bluebutton 2014 Limited, a wholly owned subsidiary of The British Land Company PLC.

Broadgate REIT Limited is the smallest and largest group for which group accounts are available and which include the company. The ultimate holding company and controlling party is Broadgate REIT Limited. Group accounts for this company are available on request from British Land, York House, 45 Seymour Street, London, W1H 7LX.

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR FKODPNBKDBPD

(END) Dow Jones Newswires

May 17, 2018 09:58 ET (13:58 GMT)

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