TIDM57OE
RNS Number : 8073A
Endeavour SCH PLC
30 September 2015
Company Registration No. 03672185
ENDEAVOUR SCH PLC
DIRECTORS' REPORT AND FINANCIAL STATEMENTS
31 MARCH 2015
CONTENTS
Company Information 1
Strategic Report 2
Directors' Report 4
Directors' Responsibility Statement 6
Independent Auditor's Report 7
Profit and Loss Account 8
Balance Sheet 9
Cash Flow Statement 10
Notes to the accounts 11-25
ENDEAVOUR SCH PLC
COMPANY INFORMATION
Registered Office
8 White Oak Square
London Road
Swanley
Kent
BR8 7AG
Serving Directors
J Graham
N Rae
Alternate Directors
A Ritchie
M Fernandes
Company Secretary
HCP Social Infrastructure (UK) Limited
Auditor
BDO LLP
55 Baker Street,
London,
W1U 7EU
Banker
Barclays Bank PLC
54 Lombard Street
London
EC3P 3AH
Legal Advisor
Pinsent Masons LLP
1 Park Row
Leeds
LS1 5AB
Paying Agent
The Bank of New York
One Canada Square
London
E14 5AL
ENDEAVOUR SCH PLC
STRATEGIC REPORT
Strategic report
The Directors have pleasure in submitting their strategic report
for the year ended 31 March 2015.
Business review
The Company's principal activity is that of Private Finance
Initiative Concessionaire for the South Tees Acute Hospitals Single
Site Project, under the terms of a Concession Agreement dated 16
August 1999 between the Company and South Tees Acute Hospitals
National Health Service Trust ('the Trust').
The Company's Concession Agreement requires it to finance,
design, develop and construct and then maintain and part operate
the enlarged hospital following completion of new facilities and
certain other work. The concession is intended to continue for a
period of 30 years after hospital completion which occurred on 16
July 2003, and the project is now in its operational phase.
The Company's operations are managed under the supervision of
its shareholders and funders and are largely determined by the
detailed terms of the Concession Agreement. For this reason, the
Company's Directors believe that further key performance indicators
for the Company are not necessary or appropriate for an
understanding of the performance or position of the Company.
The Company is obliged to meet the conditions laid down in the
Bond Trust Deed and Collateral Deed. To the best of the Directors'
knowledge the Company has met all of the obligations contained
within these Deeds and there have been no Events of Default,
Potential Events of Default or Trigger Events with regards to these
Deeds.
The Company is obliged to maintain a rating with Moody's. The
company considers the rating given to it satisfactory.
Financial performance and financial position
Income for the year of GBP35.7m (2014: GBP44.8m) and operating
profit of GBP6.5m (2014: GBP7.4m) were in line with
expectations.
Profit before tax is GBP6.7m (2014: GBP7.6m), and after an
increase in the deferred tax provision of GBP1.9m (2014: increase
of GBP0.19m), profit after tax was GBP4.9m (2014: GBP7.4m).
During the year the Directors have reassessed the basis of
measurement of the finance debtor by reviewing whether it should be
treated as a fixed rate financial asset or as a variable rate
financial asset, by virtue of the unitary payment receivable from
the customer being indexed linked. They have concluded that it is
appropriate to change from an accounting policy that treated the
finance debtor as a fixed rate asset to one where the interest
income varies according to indexation in the period. They believe
that this policy is more appropriate as it is consistent with the
methodology used to recognise interest expense in the related index
linked bond debt that finances the project.
In the opinion of the Directors, the project has achieved
satisfactory performance in the period under review.
Key performance indicators
Performance and availability deductions
The key performance indicator for the Company is the level of
performance and availability deductions levied by the client. Any
such deductions are passed down to the relevant service providers
and their quantum is an indication of the level of performance
achieved. In the period to 31 March 2015, cumulative agreed
deductions amounted to GBPnil (2014: GBPnil).
ENDEAVOUR SCH PLC
STRATEGIC REPORT (continued)
Financial performance
The Directors have modelled the anticipated financial outcome of
the project across the term of the agreement up to the end of the
concession in 2031. The Directors monitor actual financial
performance against this anticipated performance. As at 31 March
2015, the Company's performance against this measure was considered
satisfactory. The specific KPI's are discussed below in the
financial performance and financial position section.
The Company is providing a full range of facilities management
services as required under the Concession Agreement at a
satisfactory level.
Principal risks and uncertainties
Availability
Investment in the Project is funded primarily by Index Linked
Secured Guaranteed Bonds ('the Bonds') and subordinated unsecured
loan stock. During the operational phase the principal source of
funds available to meet its liabilities under the Bonds will be
Availability Payments received from the Trust under the Concession
Agreement. Failure to achieve the forecast levels of availability
would result in lower than forecast revenues and this may adversely
affect the Company's ability to make payments to Bondholders. There
have been no deductions for unavailability in the periods covered
by these financial statements.
Major Maintenance
The Company is obliged under the Concession Agreement to
undertake major maintenance and plant/equipment replacement so that
it continues to satisfy the standards required. There are a number
of factors which could lead to higher than projected costs, such as
shorter than anticipated life spans or increased inflation on
specific items of plant and equipment or worse than expected
condition of the residual estate. This risk has been mitigated
through contractual arrangements with the subcontractor undertaking
this work, as 25% of the risk of asset failure is shared with the
subcontractor.
Service Performance
The Soft Services and Maintenance Services are monitored against
agreed objective measures. Ultimately, poor performance may result
in the Trust having the right to terminate the Concession
Agreement. There have been no deductions for poor performance in
the periods covered in these financial statements.
Trust Status and Performance
Failure by the Trust to perform its obligations may affect the
Company's ability to meet its liabilities to Bondholders. However
the Trust's obligations under the Concession Agreement are
underwritten by the Secretary of State for Health.
On behalf of the Board
......................................
Neil Rae
Director
2015
ENDEAVOUR SCH PLC
DIRECTORS' REPORT
Directors' report
The Directors present their annual report and the audited
financial statements for the year ended 31 March 2015.
Financial instruments
The Company does not undertake financial instrument transactions
which are speculative or unrelated to the Company's trading
activities. The Company's funding has been arranged using the
principles of project finance with the terms of the financial
instruments, and the resulting profile of the debt service costs,
tailored to match the expected revenues arising from the Concession
Agreement.
Board approval is required for the use of any new financial
instrument, and the Company's ability to do so is restricted by
covenants in its existing funding agreements.
Other disclosures in respect of financial instruments are given
in notes 7, 8, 9, 10, 11 and 13 to the financial statements.
Financial reporting
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 monthly 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 monthly 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.
Dividends
The Directors have proposed and paid dividends in the year under
review of GBP8.63m (2014: GBP8.88m).
Future Developments
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The contract is in the operational phase and services are being
measured against original expectations at project inception and the
Company believe it will deliver in line with contract
expectations.
Directors
The following persons served as Directors of the Company during
the year:
J Graham
N Rae
A Ritchie
M Fernandes
ENDEAVOUR SCH PLC
DIRECTORS' REPORT (continued)
Disclosure of information to auditor
All of the current directors have taken all the steps that they
ought to have taken to make themselves aware of any information
needed by the Company's auditor for the purposes of their audit and
to establish that the auditor is aware of that information. The
Directors are not aware of any relevant audit information of which
the auditor is unaware.
Going Concern
After making enquiries, the Directors have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future, taking into
account currently forecast levels of cash, ability of the NHS Trust
to continue to pay the quarterly unitary charge based on its
contractual commitments and the ability of key sub-contractors to
continue to meet contractual commitments. For this reason they have
adopted the going concern basis in preparing the accounts.
Significant shareholdings and special rights
The Company is 100% owned by Endeavour SCH Holdings Limited.
Endeavour SCH Holdings Limited is owned by Semperian PPP Investment
Partners N(o) 2 Limited (43.83%) and Innisfree M&G PPP LP
(56.17%). Both the shareholders in Endeavour SCH Holdings Limited
are UK Limited Partnerships and each holds its shareholding as a
long term investment.
None of the Company's ordinary shares carry any special rights
with regard to the control of the Company. There are no known
arrangements under which financial rights are held by a person
other than the holder of the shares and no known agreements on
restrictions on share transfers or on voting rights.
Directors' appointment and replacement, allotments of shares and
control provisions
The rules about the appointment and replacement of directors are
contained in the Company's Articles of Association. Changes to the
Articles of Association must be approved by the shareholders in
accordance with the legislation in force at the time. The powers of
the directors are determined by UK legislation and the Memorandum
and Articles of Association of the Company in force from time to
time.
The Directors have in the past been authorised to issue and
allot ordinary shares and such powers have expired.
The Company is not party to any significant agreements that
would take effect, alter or terminate upon a change of control
following a takeover bid. The Company also does not have agreements
with any director or employee that would provide compensation for
loss of office or employment resulting from a takeover.
On behalf of the Board
......................................
Neil Rae
Director
2015
ENDEAVOUR SCH PLC
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the Strategic
Report, Report of the Directors and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial period. Under that law the Directors
have elected to prepare the financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law). Under company law
the Directors must not approve the financial statements unless they
are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for
that period.
In preparing these financial statements the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting 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; 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, to disclose with reasonable accuracy at any time the
financial position of the Company and to 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 confirm, to the best of their knowledge:
-- that the financial statements, which have been 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
-- that the annual report includes a fair review of the
development and performance of the business and the financial
position of the group and the parent company, together with a
description or the principal risks and uncertainties that they
face.
The names and functions of all the Directors are stated on page
one.
On behalf of the Board
......................................
Neil Rae
Director
2015
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF ENDEAVOUR SCH PLC
We have audited the financial statements of Endeavour SCH plc
for the year ended 31 March 2015 which comprise the profit and loss
account, the balance sheet, the cash flow statement and the related
notes. The financial reporting framework that has been applied in
their preparation is applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting
Practice).
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.
Respective responsibilities of directors and auditor
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Financial Reporting
Council's (FRC's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the Financial Reporting Council's website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion the financial statements:
-- give a true and fair view of the state of the company's
affairs as at 31 March 2015 and of its profit for the year then
ended;
-- have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the strategic report and
directors' report for the financial period for which the financial
statements are prepared is consistent with the financial
statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept, 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.
Stuart Barnsdall (senior statutory auditor)
For and on behalf of BDO LLP, Statutory auditor
London - UK
2015
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
ENDEAVOUR SCH PLC
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 MARCH 2015
Restated
2015 2014
Note GBP000 GBP000
TURNOVER 2 35,729 44,804
Cost of sales (28,372) (36,430)
GROSS PROFIT 7,357 8,374
Administrative expenses (865) (1,011)
OPERATING PROFIT 3 6,492 7,363
Interest payable and similar
charges 4 (8,976) (9,872)
Interest receivable and similar
income 5 9,227 10,101
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 6,743 7,592
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Tax on profit on ordinary activities 6 (1,886) (191)
---------- -----------------
PROFIT FOR THE FINANCIAL YEAR 4,857 7,401
========== =================
All profits and losses arise from continuing activities. The
accompanying notes form part of the financial statements.
Statement of total recognised gains and losses
For the year ended 31 March 2015
Restated
2015 2014
Note GBP000 GBP000
Profit for the year 4,857 7,401
-------- ----------------
Total recognised gains and losses
relating to the year 4,857 7,401
================
Prior period adjustment 20 8,791
--------
Total gains and losses recognised
since last annual report 13,648
========
ENDEAVOUR SCH PLC
BALANCE SHEET AS AT 31 MARCH 2015
Restated
2015 2014
Note GBP000 GBP000
CURRENT ASSETS
Debtors: amounts falling due
within one year 7 7,132 15,164
Debtors: amounts falling due
after more than one year 8 136,520 138,199
Cash at bank and in hand 9 20,397 17,096
164,049 170,459
=========== ===================
CREDITORS: Amounts falling due
within one year:
Trade and other Creditors (13,109) (13,142)
Borrowings (4,733) (5,340)
10 (17,842) (18,482)
=========== ===================
NET CURRENT ASSETS 146,207 151,977
TOTAL ASSETS LESS CURRENT LIABILITIES 146,207 151,977
CREDITORS: Amounts falling due
after more than one year 11 (120,406) (122,302)
PROVISIONS FOR LIABILITIES 12 (18,977) (19,079)
TOTAL NET ASSETS 6,824 10,596
=========== ===================
CAPITAL AND RESERVES
Called up share capital 14 50 50
Profit and loss account 15 6,774 10,546
EQUITY SHAREHOLDERS' FUNDS 6,824 10,596
=========== ===================
The accompanying notes form part of the financial
statements.
The financial statements were approved and authorised for issue
by the Board and were signed on its behalf:
......................................
Neil Rae
Director
2015
ENDEAVOUR SCH PLC
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2015
Restated
2015 2014
Note GBP'000 GBP'000
Net Cash Inflow from Operating
Activities 5,774 9,845
Returns on Investments and Servicing
of Finance
Interest Received 9,227 10,101
Interest Paid (5,931) (6,055)
Net Cash inflow on Returns on
Investments and Servicing of
Finance 9,070 13,891
Capital expenditure and financial
investment
Capital repayment element of
contract receivable 8,408 2,063
Net Cash (Outflow) on Returns
on Investments and Servicing
of Finance
Equity Dividends Paid (8,629) (8,876)
Financing
Bond - redemption (5,548) (5,832)
---------- ----------
Increase / (Decrease) in cash
and cash equivalents 17 3,301 1,246
========== ==========
Reconciliation of Operating
Profit to Net Cash Inflow from
Operating Activities
Operating Profit 6,492 7,363
Depreciation charged - -
(Increase) / Decrease in debtors 880 (292)
(Decrease) / Increase in creditors 390 (557)
Net movement in provisions (1,988) 3,331
Net Cash Inflow from Operating
Activities 5,774 9,845
========= =======
ENDEAVOUR SCH PLC
NOTES TO THE ACCOUNTS
FOR YEAR ENDED 31 MARCH 2015
1. Accounting policies
The following accounting policies have been applied consistently
in dealing with items that are considered material in relation to
the Company's financial statements.
a) Basis of preparation
The financial statements have been prepared in accordance with
applicable accounting standards and under the historical cost basis
or the fair value basis where the fair valuing of relevant assets
and liabilities has been applied.
b) Finance debtor
Costs incurred in building the acute hospital have been treated
as a finance debtor as, in the opinion of the Directors, the Trust
enjoys substantially all the risks and rewards of ownership.
Unitary charges received from the Trust are allocated between
services income, interest receivable and the repayment of the
finance debtor using a property specific rate so as to generate a
constant rate of return in respect of the finance debtor over the
life of the concession.
The finance debtor also includes accrued services income
representing the difference between cumulative services income
recognised in the profit and loss account and the Unitary Charge
invoiced to the Trust.
Costs incurred in respect of Variation works over the course of
the contract are added to the finance debtor with related
contributions from the Trust being credited to it.
c) Turnover
Unitary charges are allocated between service income, interest
receivable on the finance debtor and reimbursement of the finance
debtor so as to generate a constant return in respect of the
finance debtor over the life of the contract.
Turnover reflects the income allocated to the services provided
as part of the overall project and the interest receivable on the
finance debtor.
A margin is applied to costs charged to the profit and loss
account to calculate the service income credited to the profit and
loss account. This margin is calculated as total income forecast to
be receivable over the concession, less all life cycle and other
operating costs forecast to be payable over the concession.
d) Debt issue costs
Issue costs in respect of the Company's debt are recognised over
the life of the debt using the effective interest rate method and
are deducted from the carrying value of the related debt.
e) Deferred tax
As required by FRS 19 "Deferred Tax", full provision is made for
deferred tax assets and liabilities arising from all timing
differences between the recognition of gains and losses in the
financial statements and recognition in the tax computation, except
for those timing differences in respect of which the standard
specifies that deferred tax should not be recognised.
Deferred tax assets and liabilities are calculated at the tax
rates expected to be effective at the time the timing differences
are expected to reverse. Deferred tax balances are not
discounted.
ENDEAVOUR SCH COMPANY PLC
NOTES TO THE ACCOUNTS (continued)
FOR THE YEAR ENDED 31 MARCH 2015
f) Life cycle costs
The estimated cost of the Company's obligation to maintain the
hospital over the period of its agreement with the Trust is charged
to the profit and loss account as the obligation arises. A
provision has been included in the balance sheet in relation to
such life cycle maintenance costs on the basis that an obligation
exists under the Project Agreement to carry out such works to
ensure that the estate meets the require standards at any given
point in time.
g) Capitalised interest
The interest cost of financing the Company's obligations under
its Concession Agreement during the construction phase has been
capitalised and was included in the value of asset in course of
construction prior to reclassification as a finance debtor.
h) Financial Instruments
Financial instruments are recognised when the Company becomes a
party to the contractual provisions of the instrument. The
principal financial assets and liabilities of the Company are as
follows:
Trade debtors
Trade receivables are initially recognised at fair value and
then are stated at amortised cost.
Cash at bank
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September 30, 2015 12:00 ET (16:00 GMT)
Cash at bank is carried in the balance sheet at nominal
value.
Trade creditors
Trade payables are initially recognised at fair value and then
are stated at amortised cost.
Bank and other borrowings
Interest bearing bank loans, bonds, subordinated debt and other
loans are recognised initially at fair value. All borrowings are
subsequently stated at amortised cost with the difference between
initial net proceeds and redemption value recognised in the profit
and loss account over the period to redemption.
Finance debtor
The finance debtor is classified as a floating rate financial
instrument under loans and receivables as defined in paragraph 9 of
FRS 26, which are initially recognised at fair value and then are
stated at amortised cost.
i) Accounting estimates and judgements
In applying the accounting policies detailed above, decisions
sometimes have to be made as to the likely outcome of future
events. Those judgements and estimates are based on historical
experience and assumptions that the Directors believe reasonable in
the circumstances. The Directors consider the key judgements and
estimates made in preparing the financial statements to have been
those relating to the calculation of the margin applied to costs in
recognising revenue and the recognition of life cycle costs. These
judgements and estimates are discussed in more detail above.
ENDEAVOUR SCH COMPANY PLC
NOTES TO THE ACCOUNTS (continued)
FOR THE YEAR ENDED 31 MARCH 2015
j) Comparative information
The current year's results are for the year ended 31 March 2015.
Comparative information is for the 15 month period ended 31 March
2014 and is therefore not directly comparable.
k) Dividend
In accordance with Financial Reporting Standard 21 "Events after
the balance sheet date" the Company recognises dividends in the
year in which they are paid.
2. Turnover
Turnover represents the value of work done and excludes value
added tax.
All turnover is derived in the United Kingdom, and from the
principal business segment which is the provision of non-clinical
services to maintain the availability of hospital facilities.
3. Operating profit
Operating profit is stated after charging:
2015 2014
GBP000 GBP000
Auditor's remuneration
Audit of the company 16 18
Other services relating to
taxation 1 8
======== ==================
Directors' Emoluments
Directors' fees 100 98
======== ==================
These Directors' fees were paid to Innisfree Limited and
Semperian PPP Investment Partners N(o) 2 Limited for provision of
the non-executive Directors' services.
The Company has no employees other than directors.
4. Interest payable and similar charges
2015 2014
GBP000 GBP000
Secured 3.607% Index Linked
Bonds 2031 6,998 7,891
Amortisation of Bond Issue
Costs 188 191
Unsecured Subordinated Debt 1,790 1,790
------- ------------------
8,976 9,872
======= ==================
Interest payable on the Secured 3.607% Index Linked Bonds 2031
includes bond interest and bond indexation.
ENDEAVOUR SCH COMPANY PLC
NOTES TO THE ACCOUNTS (continued)
FOR THE YEAR ENDED 31 MARCH 2015
5. Interest receivable and similar income
Restated
2015 2014
GBP000 GBP000
Interest receivable on Finance
Debtor 9,109 9,999
Bank interest 118 102
9,227 10,101
======== ==========
6. Tax on profit on ordinary activities
(a) Analysis of charge in the current year
Restated
2015 2014
GBP000 GBP000
Current Tax:
UK Corporation tax on profits
for the year - -
Stamp duty land tax - -
-------- -------------------
- -
-------- -------------------
Deferred Tax:
Effect of reduced tax rate on
opening liability - (1,587)
Origination and reversal of
timing differences - current
year 1,886 1,778
-------- -------------------
Total deferred tax charge 1,886 191
Tax charge on profit on ordinary
activities 1,886 191
======== ===================
(b) Factors affecting the tax charge for the current year
The constituent elements of the tax charge for the year are set
out below:
Restated
2015 2014
GBP000 GBP000
Profit on ordinary activities
before tax 6,743 7,592
========= ==================
Profit on ordinary activities
multiplied by standard rate
of
Corporation tax in the UK of
21% (2014: 23%) 1,416 1,746
Effects of:
Taxable income (debited)/credited
to the finance debtor 1,854 724
Capital allowances and short
lease premium (339) (424)
Other differences 40 44
Sub total 2,971 2,090
Utilised in available losses (2,971) (2,090)
--------- ------------------
Current tax charge in the year - -
========= ==================
ENDEAVOUR SCH PLC
NOTES TO THE ACCOUNTS (continued)
FOR THE YEAR ENDED 31 MARCH 2015
6. Tax on profit on ordinary activities (continued)
(c) Factors that may affect future tax charges:
The corporation tax charge is expected to increase as the
estimated tax losses available to carry forward against future
profits (see note 12) are in the order of GBP6.7 million (2014:
GBP16 million) as at 31 March 2015.
7. Debtors: amounts falling due within one year
Restated
2015 2014
GBP000 GBP000
Trade debtors 5,342 6,165
Finance Debtor 1,679 8,831
Prepayments and accrued income 111 168
7,132 15,164
======== ==================
8. Debtors: amounts falling due after more than one year
Restated
2015 2014
GBP000 GBP000
Finance Debtor 136,120 137,799
Other Debtors 400 400
136,520 138,199
============ ================
Finance Debtor brought forward 146,630 148,502
Interest in the year 9,109 9,999
Amortisation in the year (17,940) (11,871)
Finance Debtor carried forward 137,799 146,630
========== ============
Finance Debtor analysed :
Due within one year 1,679 8,831
Due after more than one year 136,120 137,799
137,799 146,630
========= =========
9. Cash at bank and in hand
2015 2014
GBP000 GBP000
Cash at bank and in hand 20,397 17,096
======== ========
Cash at bank earns interest at floating rates based principally
on short-term inter-bank rates.
ENDEAVOUR SCH PLC
NOTES TO THE ACCOUNTS (continued)
(MORE TO FOLLOW) Dow Jones Newswires
September 30, 2015 12:00 ET (16:00 GMT)
FOR THE YEAR ENDED 31 MARCH 2015
10. Creditors: amounts falling due within one year
Restated
2015 2014
GBP000 GBP000
Trade creditors 879 1,093
Other taxes and social security 1,949 1,904
Accruals and deferred income 10,281 10,145
Secured 3.607% Index Linked
Bonds 2031 4,733 5,340
-------- ----------
17,842 18,482
======== ==========
11. Creditors: amounts falling due after more than one year
Restated
2015 2014
GBP000 GBP000
Subordinated Debt 14,914 14,914
Secured 3.607% Index Linked
Bonds 2031 105,492 107,388
120,406 122,302
========= ====================
Index Linked Bond
Secured 3.607% Index Linked
Bonds 2031 71,985 75,560
Add: Cumulative Indexation 40,087 39,204
--------- --------------------
112,072 114,764
Less : unamortised net issue
costs (1,847) (2,036)
--------- --------------------
110,225 112,728
========= ====================
The bonds are repayable as
follows:-
Amounts falling due within
one year 4,733 5,528
--------- --------------------
Amounts falling due after
one year
Between one and two years 4,650 4,831
Between two and five years 13,073 14,445
After five years 89,616 89,960
--------- --------------------
Total amounts falling due
after
more than one year 107,339 109,236
112,072 114,764
========= ====================
ENDEAVOUR SCH PLC
NOTES TO THE ACCOUNTS (continued)
FOR THE YEAR ENDED 31 MARCH 2015
11. Creditors: amounts falling due after more than one year
(continued)
GBP137,400,000 secured index linked bonds 2031 were created on
16 August 1999 of which GBP128,900,000 were issued and sold at
99.992%. The bonds bear interest at 3.607% per annum of their
principal amount outstanding. Interest is payable semi-annually in
arrears on 28 March and 28 September. The amount of principal
outstanding from time to time is subject to indexation in
accordance with the terms of the Bond Trust Deed.
The Company retained GBP8,500,000 index linked bonds 2031
("variation bonds") which it could sell, subject to certain
restrictions in the Collateral Deed, to finance contingencies. On
30 November 2000 the Company sold GBP5,000,000 of the variation
bonds to fund variations on the hospital construction contract.
The remaining GBP3,500,000 of unsold Variation Bonds were
cancelled on 14 February 2009 by the Principal Paying Agent, as
instructed by the issuer and in accordance with the Bond Trust Deed
and the Paying Agency Agreement.
The bonds are repayable in instalments which commenced in March
2005 and should end in March 2031.
The Company's secured creditors have the benefit of first
ranking charges granted by the Company over the whole of its
investments, undertaking, property, assets, insurances and rights
under certain contracts, both present and future, together with a
first ranking charge over all of the ordinary shares of the Company
and the Company's subordinated loan stock and those of its holding
Company, Endeavour SCH Holdings Limited.
Unsecured Loan Stock 2032 (Subordinated debt)
The Company is a wholly beneficially owned subsidiary of
Endeavour SCH Holdings Limited. The beneficial owners of the
holding Company are Innisfree M & G PPP LP, through its nominee
Innisfree Nominees Limited and Semperian PPP Investment Partners
N(o) 2 Limited.
On 16 August 1999, the Company and Endeavour SCH Holdings
Limited created GBP23,060,000 unsecured Loan Notes 2032,
constituted under Deed Polls entered into on the same date. On 30
November 2000 a further GBP1,400,000 of Loan Notes were created to
fund variations required on the construction contract.
Under the terms of an Equity Subscription Agreement dated 16
August 1999 as amended on 30 November 2000, the Shareholders of the
holding Company agreed to subscribe for Loan Stock of Endeavour SCH
Holdings Limited to the value of GBP24,460,000. Endeavour SCH
Holdings Limited in turn agreed to subscribe for up to
GBP24,460,000 of the Loan Stock of the Company. The proceeds of the
stock issue are being used by the Company to finance its
obligations under its contract with the Trust.
A proposal by the shareholders to change the payment profile of
outstanding subordinated debt principal has been approved by the
FCA. The final principal payment becomes GBP14,914,349 which was
the amount outstanding at 31 March 2015. Interest will be
calculated on this outstanding principal, and will continue to be
paid twice yearly as normal.
The Notes are repayable as follows:
2015 2014
GBP000 GBP000
After more than 5 years 14,914 14,914
========= ========
Interest is payable on the Notes at a rate of 12% per annum with
effect from 10 June 2003.
ENDEAVOUR SCH PLC
NOTES TO THE ACCOUNTS (continued)
FOR THE YEAR ENDED 31 MARCH 2015
11. Creditors: amounts falling due after more than one year
(continued)
Where the Notes are redeemed after 30 September 2003, the price
will be the higher of par less any amount already redeemed and that
price, expressed as a percentage, at which the Gross Redemption
Yield on the Notes would be equal to the Gross Redemption Yield on
such other United Kingdom Government Stock as the Company shall
determine to be appropriate based on the middle market price of the
reference stock on the third dealing day prior to the proposed date
of redemption.
The interest rate risk profile of the Company's financial
liabilities is as follows:
Fixed Fixed
Total Floating Fixed rate weighted rate
31 March rate rate average weighted
2015 31 March 31 March interest average
GBP000 2015 2015 rate at time
GBP000 GBP000 31 March for which
2015 rate
% is fixed
March
2015
Years
2015 - Sterling 125,463 110,549 14,914 12.0 19
2014 - Sterling 129,678 114,764 14,914 12.0 20
As the 3.607% index linked secured bonds are partially linked
with the Retail Price Index, the instrument has been categorised as
floating rate debt in the above table. The underlying principal of
the bonds is index linked and the 3.607% fixed interest element of
the instrument is also index linked. Total liabilities shown above
comprise the gross amount of the bonds in issue and the
subordinated debt.
12. Provision for liabilities
Deferred
Tax Lifecycle Total
GBP000 GBP000 GBP000
As at 31 March 2014
restated 13,409 5,670 19,079
Amount provided for
in the year 1,886 466 2,352
Paid during the year - (2,454) (2,454)
----------- ---------
As at 31 March 2015 15,295 3,682 18,977
========== =========== =========
ENDEAVOUR SCH PLC
NOTES TO THE ACCOUNTS (continued)
FOR THE YEAR ENDED 31 MARCH 2015
12. Provision for liabilities (continued)
The deferred tax balance is analysed as follows:
Restated
2015 2014
GBP000 GBP000
Capitalised interest 5,269 5,626
Capital allowances 10,737 11,273
Short lease premium relief 624 675
Losses carried forward (1,335) (4,165)
Provision for deferred tax 15,295 13,409
========= ================
13. Financial instruments
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All of the Company's financial liabilities are measured at
amortised cost and all of the Company's financial assets are
classified as loans and receivables.
Financial Assets
The Company has one long term financial asset being the finance
debtor (see note 8). This asset yields interest at a floating rate
comprising a fixed element of 4% plus the increase in the Retail
Price Index per annum over the term of the lease, of which 19 years
of the primary period are remaining.
Financial Risk Management Policies and Objectives
The Company's principal financial instruments comprise short
term cash deposits, index linked bonds and a subordinated loan. The
main purpose of these financial instruments is to ensure, via the
terms of the financial instruments, that the profile of the debt
service costs is tailored to match expected revenues arising from
the Concession Agreement.
The Company does not undertake financial instrument transactions
which are speculative or unrelated to the Company's trading
activities. Board approval is required for the use of any new
financial instrument, and the Company's ability to do so is
restricted by covenants in its existing funding agreements.
Exposure to liquidity, credit and interest rate risks are in the
normal course of the Company's business.
Liquidity Risk
Repayments of the index linked bonds and the subordinated loan
are tailored to match expected revenue receivable under the terms
of the Concession Agreement, so ensuring sufficient funds are
available when repayments are due.
The following table sets out the timing of expected future cash
flows, including interest payments, in respect of the company's
long term debtors and loan balances:
ENDEAVOUR SCH PLC
NOTES TO THE ACCOUNTS (continued)
FOR THE YEAR ENDED 31 MARCH 2015
13. Financial Instruments (continued)
1-2 2-5
2015 Effective Total 1 year years years 5+ years
or
interest less
rate GBP000 GBP000 GBP000 GBP000 GBP000
Bank balances (note
9) 20,397 20,397 - - -
Finance Debtor ** 4.0% 228,550 8,390 14,356 39,646 166,458
Trade debtors (note
7) 5,342 5,342 - - -
Guaranteed secured
bonds ** 3.6% (162,484) (8,784) (8,592) (24,301) (120,807)
Unsecured subordinated
loan 12.0% (14,914) - - - (14,914)
Trade creditors
(note 10) (879) (879) - - -
76,012 24,466 5,764 15,345 30,737
=========== ========= ========= ========== ===========
** The effective interest rate is adjusted for the effect of
inflation, at 31 March 2015 the annual impact was an additional
2.5% (2014: +3.2%).
1-2 2-5
2014 Effective Total 1 year years years 5+ years
or
interest less
rate GBP000 GBP000 GBP000 GBP000 GBP000
Bank balances 17,096 17,096 - - -
Finance Debtor 4.0% 246,067 17,517 8,390 41,288 178,872
Trade debtors 6,165 6,165 - - -
Guaranteed secured
bonds 3.6% (169,523) (9,574) (8,638) (24,530) (126,781)
Unsecured subordinated
loan 12.0% (14,914) - - - (14,914)
Trade creditors (1,093) (1,093) - - -
83,798 30,111 (248) 16,758 37,177
=========== ========== ========= ========== ===========
Credit Risk
Although the Trust is the only client of Endeavour SCH PLC, the
Directors are satisfied that the Trust will be able to fulfil their
collateral obligations under the Concession Agreement that are in
turn underwritten by the Secretary of State for Health. As at the
year end no undisputed amounts were past their due date. Cash and
bank balances are held with financial institutions.
Interest Rate Risk
In respect of income-earning financial assets and
interest-bearing financial liabilities, the following table
indicates their effective interest rates at the balance sheet date
and the period in which they mature:
ENDEAVOUR SCH PLC
NOTES TO THE ACCOUNTS (continued)
FOR THE YEAR ENDED 31 MARCH 2015
13. Financial instruments (continued)
1-2 2-5
2015 Effective Total 1 year years years 5+ years
or
interest less
rate GBP000 GBP000 GBP000 GBP000 GBP000
Bank balances 0.60% 20,397 20,397 - - -
Finance Debtor 4.0% 137,799 1,679 6,176 16,483 113,461
Guaranteed secured
bonds 3.6% (110,549) (4,733) (4,650) (13,074) (88,092)
Unsecured subordinated
loan 12.0% (14,914) - - - (14,914)
32,733 17,343 1,526 3,409 10,455
=========== ========= ========= ========== ==========
1-2 2-5
2014 Effective Total 1 year years years 5+ years
or
interest less
rate GBP000 GBP000 GBP000 GBP000 GBP000
Bank balances 0.60% 17,096 17,096 - - -
Finance Debtor 4.0% 146,630 8,831 1,885 17,588 118,326
Guaranteed secured
bonds 3.6% (114,764) (5,528) (4,831) (14,445) (89,960)
Unsecured subordinated
loan 12.0% (14,914) - - - (14,914)
34,048 20,399 (2,946) 3,143 13,452
============ ========== ========= ========== ==========
Fair Values
The comparison of book and fair values of the Company's
financial instruments at 31 March 2015 and 31 March 2014 is set out
below. Where available, market values have been used to determine
fair values. Where market values are not available, fair values
have been calculated by discounting cash flows at prevailing
interest rates. The disclosures below exclude short-term debtors
and creditors where there is not considered to be a material
difference between fair value and the carrying value.
ENDEAVOUR SCH PLC
NOTES TO THE ACCOUNTS (continued)
FOR THE YEAR ENDED 31 MARCH 2015
13. Financial instruments (continued)
Restated Restated
2015 2015 2014 2014
Book Fair Book Fair
value value value value
GBP000 GBP000 GBP000 GBP000
Cash at bank 20,397 20,397 17,096 17,096
Finance Debtor 137,799 158,739 146,630 180,265
Subordinated Loan
Stock (14,914) (14,914) (14,914) (14,914)
Guaranteed secured
bonds (112,072) (135,793) (114,764) (182,978)
31,210 28,429 34,048 (531)
=========== =========== =============== =============
Estimation of Fair Values
The following summarises the major methods and assumptions used
in estimating the fair values of financial instruments reflected in
the table.
Fair value of the finance debtor is calculated by discounting
future cash flows at an appropriate discount rate. The discount
rate has been calculated by reference to the 30 year Gilt Market
Yields published by the Debt Management Office.
The discount rates that have been applied to the finance debtor
at 31 March 2014 and 31 March 2015 are 3.23% and 3.52%
respectively.
The fair value of the subordinated loan stock is not believed to
be materially different to the carrying value of the liability.
The fair value of the index linked secured guaranteed bonds is
the quoted price of the bonds.
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Sensitivity Analysis
The majority of the Company's assets and liabilities are fixed
rate. The Company's bank balances are subject to floating interest
rates and a movement of plus or minus 1% in interest rates would
have an impact of approximately GBP117,000 (2014: GBP165,000) on
interest receivable.
The Company's bond creditor is index linked. A movement of plus
or minus 1% on the RPI would have an impact of approximately
GBP1,176,000 (2014: GBP1,226,000) on the indexation charge for the
period. This risk is mitigated by the fact that the Company's
contractual revenue streams are also index linked.
ENDEAVOUR SCH PLC
NOTES TO THE ACCOUNTS (continued)
FOR THE YEAR ENDED 31 MARCH 2015
14. Share capital
2015 2014
GBP000 GBP000
Allotted, Called Up and Fully Paid
50,000 ordinary shares at GBP1
each 50 50
========= =========
15. Reconciliation of movement in shareholders' funds
Restated
2015 2014
GBP000 GBP000
Opening balance - as previously
stated 10,596 2,872
Prior year adjustment (note
20) - 9,199
---------- ----------
10,596 12,071
Profit for the year - as
previously stated 4,857 7,809
Prior year adjustment (note
20) - (408)
Dividends (8,629) (8,876)
Closing balance 6,824 10,596
========== ==========
As disclosed further in note 20, reserves have been restated
since the last financial report.
The directors proposed and paid two dividends during the year
under review, totalling GBP8.63m (2014: GBP8.88m).
16. Capital Management
The Company's objectives when managing capital are:
-- To safeguard the entity's ability to continue as a going
concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders; and
-- To provide an adequate return to shareholders by minimising
any potential performance deductions under the Concession
Agreement.
The Company's debt to capital ratio over the life of the project
has been set in advance by the Concession Agreement and management
cannot vary the terms of this agreement without share and bond
holder approval.
ENDEAVOUR SCH PLC
NOTES TO THE ACCOUNTS (continued)
FOR THE YEAR ENDED 31 MARCH 2015
17. Cash Flow Statement
a) Analysis of Net debt
2014 Cash Other 2015
Flow Non Cash
Changes
GBP'000 GBP'000 GBP'000 GBP'000
Cash at Bank 17,096 3,301 - 20,397
Secured 3.607% Index
Linked Bond 2031 (112,728) 5,548 (3,045) (110,225)
Subordinated Debt (14,914) - - (14,914)
(110,546) 8,849 (3,045) (104,742)
=========== ========= =========== ===========
b) Reconciliation of Net Cash Flow to Movement in Net Debt
2015 2014
Cash Cash
Flow Flow
GBP'000 GBP'000
Increase / (Decrease) in Cash in
the Period 3,301 1,246
Cash Outflow from Redemption of Bond 5,548 5,832
--------- ---------
Change in Net Debt resulting from
cash flows 8,849 7,078
Changes in Net Debt resulting from
non-cash transactions (3,045) (3,817)
--------- ---------
Movement in Net Debt in the period 5,804 3,261
========= =========
18. Related party transactions
The Company's parent Company is Endeavour SCH Holdings Limited
which is owned jointly by Innisfree M&G PPP LP, a UK Limited
Partnership acting through its nominee Innisfree Nominees Limited
and Semperian PPP Investment Partners N(o) 2 Limited.
Under the terms of Shareholder and Management Agreements,
Innisfree Nominees Limited and Semperian PPP Investment Partners
N(o) 2 Limited provide the Company with its Directors. The value of
fees charged in the period was GBP100,000 (2014: GBP98,000).
Innisfree Nominees Limited and Semperian PPP Investment Partners
N(o) 2 Limited are parties to an Equity Subscription Agreement,
details of which are given in note 12 of the financial
statements.
19. Ultimate parent company
The immediate holding Company is Endeavour SCH Holdings Limited,
a Company registered in England and Wales. The ultimate controlling
party is Innisfree Nominees Limited who manages the share capital
on behalf of Innisfree M&G PPP LP. Copies of the Group accounts
are available from Companies House, Crown Way, Cardiff CF14
3UZ.
20. Prior period adjustment
During the year the directors have reassessed the basis of
measurement of the finance debtor by reviewing whether it should be
treated as a fixed rate financial asset or as a variable rate
financial asset, by virtue of the unitary payment receivable from
the customer being indexed linked. They have concluded that it is
appropriate to change from an accounting policy that treated the
finance debtor as a fixed rate asset to one where the interest
income varies according to indexation in the period. They believe
that this policy is more appropriate as it is consistent with the
methodology used to recognise interest expense in the related index
linked bond debt that finances the project. This change in
measurement basis, which also impacts the allocation of the unitary
payment between amounts attributable to services revenue and
amounts attributed to remuneration of the finance debtor,
represents a change in accounting policy which has been recorded by
way of a prior year adjustment. The directors have also reassessed
the presentation of income and expenditure in respect of additional
services provided by the Company's service provider to its client
and determined that it is more appropriate to present these
separately within turnover and cost of sales.
The effect of the change in the comparative year to 31 March
2014 is as follows:
Turnover Cost Interest Deferred Profit
of receivable tax for
Sales charge the
year
GBP000 GBP000 GBP000 GBP000 GBP000
Original at 31 March
2014 35,129 (25,457) 9,211 (191) 7,809
---------------------------- ---------- ---------- ------------- ---------- ---------
Reduction in turnover (1,298) (1,182)
Recognise pass through
income 10,973 (10,973) -
Increase in Interest
Receivable on Finance
Debtor 890 890
---------------------------- ---------- ---------- ------------- ---------- ---------
(Decrease)/Increase in
Profit pre tax in the
year 9,675 (10,973) 890 (408)
Net tax charge in respect
of prior year adjustment
---------------------------- ---------- ---------- ------------- ---------- ---------
(Decrease)/Increase in
Profit post tax in the
year 9,675 (10,973) 890 (408)
Restated at 31 March
2014 44,801 (36,430) 10,101 (191) 7,401
============================ ========== ========== ============= ========== =========
The effect on the balance sheet at 31 March 2014 is as
follows:
Short Long Unitary Accruals Deferred Reserves
term term Charge and tax
finance finance Control Deferred liability
debtor debtor Account Income
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Opening balance at
1 April 2013 3,145 131,517 (3,966) (2,597) (12,171) 2,872
Adjustment to balances
as at 1 April 2013 13,840 3,966 (7,560) (1,047) 9,199
--------------------------- ---------- ---------- ---------- ----------- ------------ ----------
Restated balance at
1 April 2013 3,145 145,357 - (10,157) (13,216) 12,071
Movement as previously
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