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| Name | Symbol | Market | Type |
|---|---|---|---|
| Transform | LSE:73GD | London | Bond |
| Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0 | - |
TIDM73GD
RNS Number : 6381X
Transform Schools (N.Lanarks)FdgPLC
30 April 2019
Hot Features
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Company Registration No. 05358471 (England and Wales)
TRANSFORM SCHOOLS (NORTH LANARKSHIRE) FUNDING PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
Directors Mr D Brooking
Miss K O'Brien
Mr R Gillespie
Mr C James (Appointed 1 October 2018)
Secretary HCP Social Infrastructure (UK) Limited
Company number 05358471
Registered office 8 White Oak Square
London Road
Swanley
Kent
BR8 7AG
Auditor KPMG LLP
66 Queen Square
Bristol
BS1 4BE
Page
Strategic report 1 - 2
Directors' report 3 - 5
Directors' responsibilities statement 6
Independent auditor's report to the members
of Transform Schools (North Lanarkshire)
Funding plc 7 - 11
Statement of income and retained earnings 12
Balance sheet 13
Notes to the financial statements 14 - 22
The directors present the strategic report for the year ended 31
December 2018.
Fair review of the business
The principal activity of the company is raising of finance through
bank loans, the bond market, and subordinated debt and their onward
loan to a related party, Transform Schools (North Lanarkshire) Limited
(a fellow subsidiary of Transform Schools (North Lanarkshire) Holdings
Limited) in 2005. Transform Schools (North Lanarkshire) Limited
is a company which has entered into a PFI concession contract with
North Lanarkshire Council to design, build, finance and provide
services within twenty-four primary and secondary schools. The concession
contract finishes on 31 March 2037.
Financial performance and financial position
During the year the Company was able to fully service all of its
debt requirements and therefore the Directors consider that the
performance of the Company was satisfactory. The company's purpose
is to finance the operating company (Transform Schools (North Lanarkshire)
Limited), and therefore debt service is considered the key performance
indicator.
The result for the year after taxation amounted to GBPnil (2017:
GBPnil).
Financial covenants have been met during the year, and having considered
the anticipated future performance and position of the Company,
the directors are of the opinion that the covenants will continue
to be met in the future. This has been considered based on the operating
model for the group, which forecasts cashflows for the concession,
to 2037.
The Company is reliant on Transform Schools (North Lanarkshire)
Limited to manage its risks and to meet its debt repayments. The
principal risk borne by Transform Schools (North Lanarkshire) Limited
is that lifecycle costs exceed those forecast in the financial model
agreed at financial close. This risk is mitigated by future estimates
of lifecycle expenditure being prepared by maintenance experts on
an asset by asset basis and by the periodic technical evaluations
of the physical condition of the facilities. In addition, actual
expenditure is compared to the lifecycle forecast.
Other risks borne by Transform Schools (North Lanarkshire) Limited
include a failure to achieve the forecast levels of availability;
poor performance resulting in the Council having the right to terminate
the Project Agreement; and the failure of the service provider.
The directors consider that there are appropriate mitigations in
place against these and hence the likelihood of all of these risks
occurring is considered to be low.
Key performance indicators
The Company's profit and loss account is set out on page 11 and
shows a profit after taxation for the year of GBPnil (2017: GBPnil).
The Company assesses its performance based on the financial performance
in the period of the fellow subsidiary of Transform Schools (North
Lanarkshire) Holdings Limited, Transform Schools (North Lanarkshire)
Limited.
The directors consider the performance of Transform Schools (North
Lanarkshire) Limited for the year to be satisfactory, when compared
to the financial model for the period.
The directors can report that the company was able to meet all of
its funding requirements during the year under review.
Brexit
The risks from Brexit are a result of the risk it poses to the service
providers, rather than the company itself. Therefore, this is linked
to the service performance and service provider failure risks referred
to above. The company is substantively insulated from these risks
because non-performance will result in deductions being passed down
to the service providers. However, there remains a risk that in
extreme circumstances non-performance may result in the Council
having the right to terminate the Project Agreement, however performance
levers are significantly below threshold levels at which point the
Council would be in that position.
The service providers have performed a review of their respective
exposure to Brexit. The relevant concerns relate to availability
of spare parts, materials and EU labour, with primary concerns revolving
around delays in delivery and increased transportation costs of
those supplies which come from the EU. While there will likely be
some disruption, each service provider has a strategy in place to
keep this to a minimum. This will result in higher costs to the
service providers but not impact the company itself. The directors
are comfortable that the increased costs and disruption will not
threaten the services providers to such an extent as to put the
project at risk.
On behalf of the board
..............................
Mr R Gillespie
Director
.........................
The directors present their annual report and financial statements
for the year ended 31 December 2018.
Principal activities
The Company's principal activity is the financing of a Private Finance
Initiative (PFI) concession contract with North Lanarkshire Council.
On 8 June 2005, the Company issued GBP87,796,000 index-linked bonds
and took out an index-linked loan of GBP70,000,000. The proceeds
less issue costs were loaned on the same terms to a fellow subsidiary
of Transform Schools (North Lanarkshire) Holdings Limited, Transform
Schools (North Lanarkshire) Limited.
The Directors expect the activities to continue on this basis.
Results and dividends
The results for the year are set out on page 12.
No ordinary dividends were paid. The directors do not recommend
payment of a final dividend.
Directors
The directors who held office during the year and up to the date
of signature of the financial statements were as follows:
Mr D Brooking
Miss K O'Brien
Mr R Sheehan (Resigned 1 October 2018)
Mr R Gillespie
Mr C James (Appointed 1 October 2018)
Qualifying third party indemnity provisions
The company has made qualifying third party indemnity provisions
for the benefit of its directors during the year. These provisions
remain in force at the reporting date.
Financial instruments
The Company's financial instruments include borrowings. The main
purpose of these financial instruments is to raise finance for the
Transform Schools (North Lanarkshire) Group operations. The Company
has not entered into derivative transactions. It is, and has been
throughout the period under review, the Company's policy that no
trading in financial instruments be undertaken. The main risks arising
from the Company's financial instruments are interest rate risk
and liquidity risk. The Board reviews and agrees policies for managing
each of these risks and they are summarised below. These policies
have remained unchanged throughout the period.
Principal risks and uncertainties
The Company recognises that effective risk management is fundamental
to achieving its business objectives in order to meet its commitments
in financing the PFI contract. Risk management contributes to the
success of the business by identifying opportunities and anticipating
risks in order to improve business performance and fulfil the Company's
contractual obligations.
Liquidity risk
The Company's policy throughout the year has been that, to ensure
continuity of funding, all of its borrowings should be matched by
amounts owing from Transform Schools (North Lanarkshire) Limited
with the same maturity.
Interest rate risk / Inflation risk
The Company's exposure to adverse movements in interest rates and
inflation on its borrowings is matched by an equal but opposite
exposure on amounts owing from Transform Schools (North Lanarkshire)
Limited with the same maturity.
Capital risk management
The Company manages its capital to ensure it is able to continue
as a going concern and to maintain an optimal capital structure
to reduce the cost of capital. The capital structure of the Company
comprises equity attributable to equity holders consisting of ordinary
share capital, reserves and retained earnings as disclosed in Note
12.
Credit risk
The Company's credit risk is primarily attributable to its other
receivables however this is mitigated as the counterparties are
all related parties. In addition, the PFI concession contract and
associated receivables of the Company's sole customer, Transform
School (North Lanarkshire) Limited, are underwritten by the Secretary
of State.
Financial risk management objectives and policies
The Company has outsourced the financial reporting function to HCP
Social Infrastructure (UK) Limited (HCP). Authorities remain vested
in the board members of the Company. HCP reports regularly to the
board of the Company. The Board receives regular reports from HCP
which specifically summarise and address the financial, contractual
and commercial risks that the company is exposed to, and are pertinent
to the industry in which the Company operates.
The Board also receives quarterly management accounts with explanations
of variances from annual budgets and forecasts, which are in turn
compared to the Financial Model, which represents the long term
business plan of the Company and outlines its ability to comply
with its debt obligations and covenants. Material deviations from
the business plan are investigated and reported on. Supporting this
process, HCP evaluates its performance under the framework of an
Internal Audit and Assessment programme which sits within its own
Corporate Governance framework.
This process ensures that the project remains robust and viable
throughout the life of the contract.
The board does not believe an audit committee is required for the
following reasons:
The board itself fulfils the responsibilities and requirements of
an audit committee, through reviewing the financial controls and
considering the appropriateness of the internal control and risk
management systems, It also controls the appointment of the auditor,
considers their independence and sets auditor remuneration.
Going concern
The Company believes that future economic benefits will cover the
obligations that arose from the financing of the concession contract
held by Transform Schools (North Lanarkshire) Limited.
The Directors have reviewed the cash flow forecasts. The Company
is dependent on Transform Schools (North Lanarkshire) Limited generating
sufficient cashflows to settle the payments of principal and interest
on the onward loan of the funding which the Company raised. Taking
into account reasonable possible risks in operations to the Company
and Transform Schools (North Lanarkshire) Limited and the fact the
obligations of Transform Schools (North Lanarkshire) Limited's sole
customer are underwritten by the Secretary of State for Education
the Directors believe that the company will be able to settle it's
liabilities as they fall due for the foreseeable future and therefore
it is appropriate to prepare these financial statements on the going
concern basis.
Auditor
Pursuant to Section 487 of the Companies Act 2006, the auditor will
be deemed to be reappointed and KPMG LLP will therefore continue
in office.
Statement of disclosure to auditor
So far as each person who was a director at the date of approving
this report is aware, there is no relevant audit information of
which the company's auditor is unaware. Additionally, the directors
individually have taken all the necessary steps that they ought
to have taken as directors in order to make themselves aware of
all relevant audit information and to establish that the company's
auditor is aware of that information.
Responsibility statement of the directors in respect of the annual
financial report
The directors confirm that: (a) the financial statements, prepared
in accordance with UK Generally Accepted Accounting Practice, give
a true and fair view of the assets, liabilities, financial position
and profit or loss of the Company; and (b) the Strategic report
includes a fair review of the development and performance of the
business and the position of the Company, together with a description
of the principal risks and uncertainties that they face.
Registered office
The Company's Registered Office is 8 White Oak Square, Swanley,
Kent, BR8 7AG.
On behalf of the board
..............................
Mr R Gillespie
Director
.........................
The directors are responsible for preparing the Strategic Report,
the Directors' Report and the financial statements in accordance
with applicable law and regulations.
Company law requires the directors to prepare financial statements
for each financial year. Under that law they have elected to prepare
the financial statements in accordance with UK accounting standards
and applicable law (UK Generally Accepted Accounting Practice),
including FRS 102 The Financial Reporting Standard applicable in
the UK and Republic of Ireland.
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 and
prudent;
* state whether applicable UK accounting standards have
been followed, subject to any material departures
disclosed and explained in the financial statements;
* 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 and a Directors' Report that complies
with that law and those regulations.
1 Our opinion is unmodified
We have audited the financial statements of Transform Schools (North
Lanarkshire) Funding Plc ("the Company") for the year ended 31 December
2018 which comprise the Statement of Income and Retained Earnings,
the Balance Sheet and the related notes, including the accounting
policies in note 1.
In our opinion the financial statements:
* give a true and fair view of the state of the
Company's affairs as at 31 December 2018 and of its
result for the year then ended;
* have been properly prepared in accordance with UK
accounting standards, including FRS 102 The Financial
Reporting Standard applicable in the UK and Republic
of Ireland; 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 appointed as auditor by the directors during the year ended
31 December 2014. The period of total uninterrupted engagement is
for the 5 financial years ended 31 December 2018. We have fulfilled
our ethical responsibilities under, and we remain independent of
the Company in accordance with, UK ethical requirements including
the FRC Ethical Standard as applied to listed public interest entities.
No non-audit services prohibited by that standard were provided.
2 Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment,
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
(unchanged from 2017), in arriving at our audit opinion above, together
with our key audit procedures to address this matter and, as required
for public interest entities, our results from those procedures.
This matter was addressed, and our results are based on procedures
undertaken, in the context of, and solely for the purpose of, our
audit of the financial statements as a whole, and in forming our
opinion thereon, and consequently are incidental to that opinion,
and we do not provide a separate opinion on this matter.
Intra-group receivables
(GBP172.6 million; 2017: GBP175.5 million)
Refer to page 15 (accounting policy) and page 19 (financial disclosures).
Recoverability of intra-group receivables balances
The carrying amount of the Company's intra-group receivables balances,
held at amortised cost less impairment represents 100% (2017: 100%)
of the Company's total assets.
We do not consider the recoverable amount of these receivables to
be at a high risk of significant misstatement, or to be subject
to a significant level of judgement. However, due to their materiality
in the context of the Company financial statements as a whole, this
is considered to be the area which had the greatest effect on our
overall audit strategy and allocation of resources in planning and
completing our company audit.
Our response
Our procedures included:
* Tests of detail: Comparing the carrying amount of the
intra-group receivable with the respective net asset
values of the counterparty (the intra-group related
party), excluding the intra-group liability to
Transform School (North Lanarkshire) Funding Plc, to
identify whether the remaining net asset values of
the counterparty, are sufficient to repay the
intra-group receivables.
* Forecast review: Reviewing the counterparty (the
intra-group related party) forecasts, to identify
whether it is appropriate to consider it likely that
sufficient cash will be generated to allow the
repayment of the debt, when it falls due. As part of
assessing the forecast cash inflows we have inspected
the agreement with North Lanarkshire Council
guaranteeing the unitary charge income until 2037,
subject to meeting performance requirements, and
assessed that forecast cash flows are in line with
our own expectations based on our knowledge of the
entity and experience of the industry in which it
operates.
Our results
The results of our testing were satisfactory and we considered the
amount of the intra-group receivables to be acceptable (2017: acceptable).
3 Our application of materiality and an overview of the scope of
our audit
Materiality for the financial statements as a whole was set at GBP1.70
million (2017: GBP1.76 million), determined with reference to a
benchmark of total assets of GBP172.6 million (2017: GBP175.5 million)
of which it represents 1% (2017: 1%).
We agreed to report to the Board of Directors any corrected or uncorrected
identified misstatements exceeding GBP85,000 (2017: GBP85,000),
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.
4 We have nothing to report on going concern
The Directors have prepared the financial statements on the going
concern basis as they do not intend to liquidate the Company or
to cease its operations, and as they have concluded that the Company's
financial position means that this is realistic. They have also
concluded that there are no material uncertainties that could have
cast significant doubt over its ability to continue as a going concern
for at least a year from the date of approval of the financial statements
("the going concern period").
Our responsibility is to conclude on the appropriateness of the
Directors' conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this audit
report. However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were made,
the absence of reference to a material uncertainty in this auditor's
report is not a guarantee that the Company will continue in operation.
In our evaluation of the Directors' conclusions, we considered the
inherent risks to the Company's business model, including the impact
of Brexit, and analysed how those risks might affect the Company's
financial resources or ability to continue operations over the going
concern period. We evaluated those risks and concluded that they
were not significant enough to require us to perform additional
audit procedures.
Based on this work, we are required to report to you if we have
concluded that the use of the going concern basis of accounting
is inappropriate or there is an undisclosed material uncertainty
that may cast significant doubt over the use of that basis for a
period of at least a year from the date of approval of the financial
statements.
We have nothing to report in these respects, and we did not identify
going concern as a key audit matter.
5 We have nothing to report on the strategic report and the directors'
report
The directors are responsible for the strategic report and the directors'
report. Our opinion on the financial statements does not cover those
reports and we do not express an audit opinion thereon.
Our responsibility is to read the strategic report and the directors'
report 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
strategic report and the directors' report;
* in our opinion the information given in those reports
for the financial year is consistent with the
financial statements; and
* in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
6 We have nothing to report on the other matters on which we are
required to report by exception
Under the Companies Act 2006, we are required to report to you if,
in our opinion:
* adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not
been received from branches not visited by us; or
* the financial statements are not in agreement with
the accounting records and returns; or
* certain disclosures of directors' remuneration
specified by law are not made; or
* we have not received all the information and
explanations we require for our audit.
We have nothing to report in these respects.
7 Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 6, the
Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error; assessing the Company's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern; and using the going concern basis
of accounting unless they either intend to liquidate the Company
or to cease operations, or have no realistic alternative but to
do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material misstatement,
whether due to fraud or other irregularities (see below), or error,
and to issue our opinion in an auditor's report. Reasonable assurance
is a high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud,
other irregularities or error and are considered material if, individually
or in aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities.
Irregularities - ability to detect
We identified areas of laws and regulations that could reasonably
be expected to have a material effect on the financial statements
from our general commercial and sector experience, 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. We communicated identified laws and regulations
throughout our team and remained alert to any indications of non-compliance
throughout the audit.
The potential effect of these laws and regulations on the financial
statements varies considerably.
The Company is subject to laws and regulations that directly affect
the financial statements including financial reporting legislation
(including related company legislation) and taxation legislation
and we assessed the extent of compliance with these laws and regulations
as part of our procedures on the related financial statement items.
Whilst the company is subject to many other laws and regulations,
we did not identify any others where the consequences of non-compliance
alone could have a material effect on amounts or disclosures in
the financial statements.
Owing to the inherent limitations of an audit, there is an unavoidable
risk that we may not have detected some material misstatements in
the financial statements, even though we have properly planned and
performed our audit in accordance with auditing standards. For example,
the further removed non-compliance with laws and regulations (irregularities)
is from the events and transactions reflected in the financial statements,
the less likely the inherently limited procedures required by auditing
standards would identify it. In addition, as with any audit, there
remained a higher risk of non-detection of irregularities, as these
may involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal controls. We are not responsible for
preventing non-compliance and cannot be expected to detect non-compliance
with all laws and regulations.
8 The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them
in an auditor's report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company's members, as a
body, for our audit work, for this report, or for the opinions we
have formed.
Huw Brown (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
66 Queen Square
Bristol
BS1 4BE
.........................
2018 2017
Notes GBP'000 GBP'000
Interest receivable and similar
income 4 9,883 9,818
Interest payable and similar
expenses 5 (9,883) (9,818)
Result before taxation - -
Taxation 6 - -
Result for the financial year - -
The Statement of Income and Retained Earnings has been prepared
on the basis that all operations are continuing operations.
The accompanying notes form an integral part of the financial statements.
2018 2017
Notes GBP'000 GBP'000 GBP'000 GBP'000
Current assets
Debtors falling due after
more than one year 8 163,454 166,765
Debtors falling due within
one year 8 9,162 8,704
172,616 175,469
Creditors: amounts falling
due within one year 10 (9,162) (8,704)
Net current assets 163,454 166,765
Creditors: amounts falling
due after more than one
year 11 (163,404) (166,715)
Net assets 50 50
Capital and reserves
Called up share capital 12 50 50
The financial statements were approved by the board of directors
and authorised for issue on ......................... and are signed
on its behalf by:
..............................
Mr R Gillespie
Director
Company Registration No. 05358471
The accompanying notes form an integral part of the financial statements.
1 Accounting policies
Company information
Transform Schools (North Lanarkshire) Funding plc is a private
company limited by shares incorporated in England and Wales.
The registered office is 8 White Oak Square, London Road, Swanley,
Kent, BR8 7AG.
1.1 Accounting convention
These financial statements have been prepared in accordance with
FRS 102 "The Financial Reporting Standard applicable in the UK
and Republic of Ireland" ("FRS 102") and the requirements of
the Companies Act 2006. The presentation currency of these financial
statements is sterling. All amounts in the financial statements
have been rounded to the nearest GBP1,000.
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in
these financial statements.
The Company's parent undertaking, Transform Schools (North Lanarkshire)
Holdings Limited includes the Company in its consolidated financial
statements. The consolidated financial statements of Transform
Schools (North Lanarkshire) Holdings Limited are prepared in
accordance with FRS102 and are available to the public and may
be obtained from Companies House, Crown Way, Cardiff, CF14 3UZ.
In these financial statements, the company is considered to be
a qualifying entity (for the purposes of this FRS) and has applied
the exemptions available under FRS 102 in respect of the following
disclosures:
* Reconciliation of number of shares outstanding from
the beginning to the end of the period;
* Cash flow statement and related notes; and
* Key management personnel compensation.
1.2 Going concern
The directors have reviewed the cash flow forecasts. The Company
is dependent on Transform Schools (North Lanarkshire) Limited
generating sufficient cashflows to settle the payments of principal
and interest on the onward loan of the funding which the Company
raised. Taking into account reasonable possible risks in operations
to the Company and Transform Schools (North Lanarkshire) Limited
and the fact the obligations of Transform Schools (North Lanarkshire)
Limited's sole customer are underwritten by the Secretary of
State for Education the Directors believe that the Company will
be able to settle it's liabilities as they fall due for the foreseeable
future and therefore it is appropriate to prepare these financial
statements on the going concern basis.
1 Accounting policies
1.3 Financial instruments
The Company has elected to apply the provisions of Section 11
"Basic Financial Instruments" of FRS102 to all of its financial
instruments. Financial instruments are recognised in the Company's
statement of financial position when the company becomes party
to the contractual provisions of the instrument.
Financial assets and liabilities are offset with the net amounts
presented in the financial statements, when there is a legally
enforceable right to set-off the recognised amounts and there
is an intention to settle on a net basis, or to realise the asset
and settle the liability simultaneously.
Trade and other debtors / creditors
Trade and other debtors are recognised initially at transaction
price plus attributable transaction costs. Trade and other creditors
are recognised initially at transaction price less attributable
transaction costs. Subsequent to initial recognition they are
measured at amortised cost using the effective interest method,
less any impairment losses in the case of trade debtors. If the
arrangement constitutes a financing transaction, for example
if payment is deferred beyond normal business terms, then it
is measured at the present value of future payments discounted
at a market rate of instrument for a similar debt instrument.
Interest-bearing borrowings classified as basic financial instruments
Index-linked bonds and index-linked loans are initially stated
at the amount of the net proceeds after deduction of related
issue costs. The carrying amount is increased by the finance
cost in respect of the accounting period and reduced by payments
made in that period. The index-linked secured bonds and index-linked
secured term loan are each carried at amortised cost, using the
effective interest rate method, taking account of projected indexation
across the term of the liability.
Subordinated loans are initially stated at the amount of the
net proceeds after deduction of related issue costs. The carrying
amount is increased by the finance cost in respect of the accounting
period and reduced by payments made in that period.
Other financial assets
Other financial assets, including investments in equity instruments
which are not subsidiaries, associates or joint ventures, are
initially measured at fair value, which is normally the transaction
price. Such assets are subsequently carried at fair value and
the changes in fair value are recognised in profit or loss, except
that investments in equity instruments that are not publicly
traded and whose fair values cannot be measured reliably are
measured at cost less impairment.
Impairment of financial assets
Financial assets, other than those held at fair value through
profit and loss, are assessed for indicators of impairment at
each reporting end date.
Financial assets are impaired where there is objective evidence
that, as a result of one or more events that occurred after the
initial recognition of the financial asset, the estimated future
cash flows have been affected. If an asset is impaired, the impairment
loss is the difference between the carrying amount and the present
value of the estimated cash flows discounted at the asset's original
effective interest rate. The impairment loss is recognised in
profit or loss.
If there is a decrease in the impairment loss arising from an
event occurring after the impairment was recognised, the impairment
is reversed. The reversal is such that the current carrying amount
does not exceed what the carrying amount would have been, had
the impairment not previously been recognised. The impairment
reversal is recognised in profit or loss.
1 Accounting policies
1.3 Financial instruments (continued)
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights
to the cash flows from the asset expire or are settled, or when
the company transfers the financial asset and substantially all
the risks and rewards of ownership to another entity, or if some
significant risks and rewards of ownership are retained but control
of the asset has transferred to another party that is able to
sell the asset in its entirety to an unrelated third party.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company's contractual
obligations expire or are discharged or cancelled.
1.4 Equity instruments
Equity instruments issued by the company are recorded at the
proceeds received, net of transaction costs. Dividends payable
on equity instruments are recognised as liabilities once they
are no longer at the discretion of the company.
2 Auditor's remuneration
2018 2017
Fees payable to the company's auditor and associates: GBP'000 GBP'000
For audit services
Audit of the financial statements of the company 3 3
The auditor remuneration was borne by Transform Schools (North
Lanarkshire) Limited.
3 Employees
There were no employees during the year (2017: none).
4 Interest receivable and similar income
2018 2017
Notes GBP'000 GBP'000
Interest on the loans to Transform
Schools (North Lanarkshire) Limited 8 9,883 9,818
5 Interest payable and similar expenses
2018 2017
GBP'000 GBP'000
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans 5,848 5,814
Interest on bonds 2,116 2,130
Other finance charges 255 262
Interest on subordinated loans 1,438 1,393
Amortisation of finance arrangement costs 226 219
Total interest payable and similar expenses 9,883 9,818
6 Taxation
The results for the year do not give rise to a tax charge (2017:
GBPnil).
7 Financial instruments
The Company's financial instruments include borrowings. The main
purpose of these financial instruments is to raise finance for
the Transform Schools (North Lanarkshire) Group operations. The
Company has not entered into derivative transactions. It is,
and has been throughout the period under review, the Company's
policy that no trading in financial instruments be undertaken.
The main risks arising from the Company's financial instruments
are interest rate risk and liquidity risk. The Board reviews
and agrees policies for managing each of these risks and they
are summarised below. These policies have remained unchanged
throughout the period.
Interest rate risk / Inflation risk
The Company's exposure to adverse movements in interest rates
and inflation on its borrowings is matched by an equal but opposite
exposure on amounts owing from Transform Schools (North Lanarkshire)
Limited with the same maturity.
Capital risk management
The Company manages its capital to ensure it is able to continue
as a going concern and to maintain an optimal capital structure
to reduce the cost of capital. The capital structure of the Company
comprises equity attributable to equity holders consisting of
ordinary share capital, reserves and retained earnings as disclosed
in Notes 12.
Liquidity risk
The Company's policy throughout the year has been that, to ensure
continuity of funding, all of its borrowings should be matched
by amounts owing from Transform Schools (North Lanarkshire) Limited
with the same maturity.
Credit risk
The Company's credit risk is primarily attributable to its other
receivables however this is mitigated as the counterparties are
all related parties. In addition, the PFI concession contract
and associated receivables of the Company's sole customer, Transform
School (North Lanarkshire) Limited, are underwritten by the Secretary
of State.
Interest rate profile
The index-linked bonds have interest payable at a rate of 2.343%
plus RPI indexation on a principal amount that is also subject
to RPI indexation.
The bank term loan has interest payable at a rate of 1.950% plus
RPI indexation on a principal amount that is also subject to
RPI indexation.
The loan stock has interest payable at a rate of 7.550% above
the six month LIBOR rate.
Borrowing facilities
The Company had no more undrawn committed borrowing facilities
at 31 December 2018 (2017: GBPnil).
Fair values
The fair values of the index-linked loan, index-linked bond and
the subordinated debt have been calculated by discounting the
expected future cash flows at prevailing interest rates. Expected
future cash flows have been calculated assuming that future increases
in the Retail Price Index are constant at 2.5%. The UK gilt yield
curve and an assumed credit spread of 1% for the index-linked
loan, 1% for the index-linked bond and 1% for the subordinated
debt, have been used as appropriate discount rates.
7 Financial instruments
2018 2017
Book value Fair value Book value Fair value
GBP'000 GBP'000 GBP'000 GBP'000
Index-linked
bonds 86,092 108,536 87,078 105,858
Index-linked loans 68,138 80,663 70,009 79,250
Subordinated loan stock 17,084 31,052 17,084 30,006
171,314 220,251 174,171 215,114
8 Debtors
2018 2017
Amounts falling due within GBP'000 GBP'000
one year:
Amounts due from Transform Schools (North Lanarkshire)
Limited 9,162 8,704
Amounts falling due after
one year:
Amounts due from Transform Schools (North Lanarkshire)
Limited 163,454 166,765
Total debtors 172,616 175,469
Amounts owing from Transform Schools (North Lanarkshire) Limited
comprise a loan which is made up of the proceeds of GBP87,796,000
index-linked secured bonds, a GBP70,000,000 loan from European
Investment Bank, GBP17,194,683 subordinated loan stock and a
GBP50,000 direct loan. The balance is stated after the deduction
of amortised issue costs of GBP3,645,385 (2017: GBP3,864,727).
The terms and conditions applicable to the amounts owing from
Transform Schools (North Lanarkshire) Limited are the same as
those applicable to the borrowings of Transform Schools (North
Lanarkshire) Funding plc (see Note 9).
--
9 Borrowings
2018 2017
GBP'000 GBP'000
Index-linked loans 68,138 69,706
Index-linked bonds 86,092 87,379
Subordinated loans 17,084 17,084
171,314 174,171
Payable within one year 7,910 7,456
Payable after one year 163,404 166,715
Amounts included above which fall due after five years:
138,202 138,202
The index-linked secured bonds due 2036 of GBP87,796,000 were
created on 8 June 2005, all of which were issued and sold. Interest
on the bonds is payable semi-annually at a rate of 2.343% plus
RPI indexation, commencing on 30 September 2005. Unless previously
redeemed or purchased and cancelled, the bonds will mature on
31 March 2036. The principal amount outstanding of the bonds
is adjusted semi-annually for RPI indexation. The indexation
ratio is calculated as the RPI for the month, eight months prior
to the payment date compared against the same month in the preceding
year.
The index linked bank secured term loan is from the European
Investment Bank with repayments commencing September 2008 and
semi-annually thereafter until September 2034. The loan bears
interest at a rate of 1.950% plus RPI indexation. The capital
amount outstanding of the loan is adjusted semi-annually for
RPI indexation. The indexation ratio is calculated as the RPI
for the month, eight months prior to the payment date compared
against the same month in the preceding year.
The bank loan has attached certain covenants regarding, inter
alia, performance of the company and Transform Schools (North
Lanarkshire) Limited of financial and non-financial obligations
under the PFI contracts. In the current and prior years, the
company was fully compliant with all covenants.
The above borrowings are secured by a fixed and floating charge
over the whole of the Company's and Group's undertaking and assets.
The secured subordinated loan stock bears interest at 7.550%
above the six month LIBOR rate, and is repayable in instalments
between 2009 and 2033. It is secured by second fixed and floating
charges over the undertaking, property, assets and rights of
the Company.
10 Creditors: amounts falling due within one year
2018 2017
Notes GBP'000 GBP'000
Loans and overdrafts 9 7,910 7,456
Amounts owed to group undertakings 355 355
Accrued interest 897 893
9,162 8,704
All of the financial liabilities included above
are held at amortised cost.
11 Creditors: amounts falling due after
more than one year
2018 2017
Notes GBP'000 GBP'000
Loans and overdrafts 9 163,404 166,715
All of the financial liabilities included above
are held at amortised cost.
12 Share capital
2018 2017
GBP'000 GBP'000
Ordinary share capital
Issued and fully paid
50,000 Ordinary of GBP1 each 50 50
13 Related party transactions
At 31 December 2018, the subordinated loan stock totalled GBP17,084,000,
divided between Equitix Education 2 Limited, GBP8,542,000 (2017:
GBP8,542,000) and Innisfree Nominees Limited GBP8,542,000 (2017:
GBP8,542,000) split between Innisfree PFI Secondary Fund LP (ISF)
and Innisfree PFI Secondary Fund 2 LP (ISF2) in the ratio 16%
to 34% respectively.
Subordinated debt interest accrued at 31 December 2018 totalled
GBP372,0000 (2017: GBP355,000), divided between Equitix Education
2 Limited for GBP186,000 and Innisfree Nominees Limited for GBP186,000
split between ISF and ISF2 in the ratio noted above.
During the year, the Company was under the management of HCP
Social Infrastructure (UK) Limited under a management services
agreement. HCP is beneficially owned by Innisfree M&G PPP LP
and is therefore a related party to Innisfree Limited, which
is a nominee shareholder of the Transform Schools (North Lanarkshire)
group.
As a wholly-owned subsidiary of Transform Schools (North Lanarkshire)
Holdings Limited, the company has taken advantage of the exemption
in Section 33 of FRS102 'Related party disclosures' from disclosing
related party transactions with other group companies within
these financial statements.
14 Controlling party
The Company is a subsidiary of Transform Schools (North Lanarkshire)
Holdings Limited, which is incorporated in Great Britain and
registered in England and Wales. The ultimate parent undertakings
of Transform Schools (North Lanarkshire) Holdings Ltd are Equitix
Education 2 (50%) and two limited partnerships, Innisfree PFI
Secondary Fund (16%) and Innisfree PFI Secondary Fund 2 LP (34%),
managed by Innisfree. The Company has no ultimate controlling
party.
The only company in which the result of Transform Schools (North
Lanarkshire) Funding plc is consolidated is Transform Schools
(North Lanarkshire) Holdings Limited. Copies of the financial
statements are available from the registered office at 8 White
Oak Square, London Road, Swanley, Kent, London BR8 7AG.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR SDUFMSFUSESL
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April 30, 2019 12:13 ET (16:13 GMT)
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