TIDM80UC
RNS Number : 6347M
Connect M77/GSO
31 July 2017
Registered number
04698798
CONNECT M77/GSO PLC
Annual Report and Financial Statements
For the Year Ended
31 March 2017
CONNECT M77/GSO PLC
Annual Report and Financial Statements
Contents
Page
Company information 1
Strategic report 2 - 4
Directors' Report 5 - 6
Directors' Responsibilities Statement 7
Independent auditor's report 8
Profit and loss account 9
Balance Sheet 10
Statements of changes in equity 11
12 -
Notes to the financial statements 24
CONNECT M77/GSO PLC
Company Information
Directors
David William Bowler
Mark Mageean (appointed 01/08/16)
Matthew Edwards (appointed 24/01/17)
David Graham Blanchard (appointed 20/06/17)
Andrew Dean (resigned 21/03/17)
Louis Javier Falero (resigned on 02/09/16)
Brian Roland Walker (resigned on 01/08/16)
Company Secretary
Patrick McCarthy
Auditor
KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
Bankers
Royal Bank of Scotland
9th Floor
280 Bishopsgate
London
United Kingdom
EC2M 4RB
Registered office
6th Floor
350 Euston Road
Regents Place
London
United Kingdom
NW1 3AX
Registered number
04698798
CONNECT M77/GSO PLC
Strategic Report
for the year ended 31 March
2017
The Directors, in preparing this Strategic Report, have
complied with s414C of the Companies Act 2006.
Strategic Review
The Company is incorporated in Great Britain, registered
in England and Wales and domiciled in the United Kingdom.
On 7 May 2003 Connect M77/GSO plc signed a contract with
East Renfrewshire Council (on behalf of the Scottish Government
for the M77 and South Lanarkshire Council and East Renfrewshire
Council for the Glasgow Southern Orbital (GSO)) to design,
build, finance and operate (DBFO) the M77 from Fenwick
to Malletsheugh and the GSO from Malletsheugh to Philipshill,
East Kilbride and sections of the A726 and to maintain
these roads under a licence over a 32 year period as well
as modify certain sections of the A77. In accordance with
the concession agreement the Company is responsible for
operating the roads together with carrying out all of the
routine and major life cycle maintenance for the life of
the concession.
The new road sections were opened to the public in April
2005 and the final completion certificate was issued in
September 2005.
There have been no changes to the Company's activities
in the year under review and none are currently contemplated.
Review of business
The results for the year are set out on page 9. The loss
for the year before taxation was GBP(61,000) (2016 - profit
of GBP29,095,000) and the net liabilities position as at
31 March 2017 is GBP29,511,000 (2016 - GBP29,137,000) for
the Company.
The years performance was in line with expectations. In
2016 the Company's operating profit and its profit on ordinary
activities after taxation benefited by GBP27.4m recognised
on the reclassification of the PFI concession from a fixed
asset to a financial asset because of the demand variation
contract. The Company entered into a new contract as at
31st March 2016, whereby there was a change from a demand
element of the Payment Mechanism (based on actual traffic
usage) to a fixed usage payment for the remaining life
of the concession. This variation eliminates the exposure
of traffic usage risk on the Project. There have been no
other changes to the Company's activities in the year under
review and no others are currently contemplated.
Key Performance Indicators
The Company has set specific business objectives, which
are monitored using a number of key performance indicators
("KPIs"). The relevant KPIs for this report are detailed
below:
2017 2016
GBP '000 GBP '000
(Loss) / Profit after
taxation 42 18,500
Net liabilities (29,095) (29,137)
Key Performance Indicators (continued)
Despite the Company showing net liabilities, the Company's
projections, taking account of reasonably possible counterparty
performance, show that the Company expects to be able to
continue to operate for the foreseeable future. Accordingly,
they continue to adopt the going concern basis in preparing
the annual report and financial statements.
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 fulfilling the PFI contract
and in delivering a safe and efficient service. Risk management
contributes to the success of the business by identifying
opportunities and anticipating risks in order to improve
business performance and fulfil our contractual obligations.
The Financial risks are described in detail in note 13
of the Financial Statements.
Credit & cash flow risks
The relevant financial risks to the Company are credit
and cash flow risks, which arise from its primary client,
East Renfrewshire Council. The credit and cash flow risks
are not considered significant as the client is a government
organisation.
Interest rate risk
The financial risk management objective of the Company
is to ensure that financial risks are mitigated by the
use of financial instruments where they cannot be addressed
by means of contractual provisions. There are no derivatives,
risk is mitigated through a fixed rate loan instrument.
Financial instruments are not used for speculative purposes.
Liquidity risk
The Company's liquidity risk is principally managed through
financing the Company by means of long-term borrowings,
with an amortisation profile that matches the expected
availability of funds from the Company operating activities.
In addition, the Company maintains reserve bank accounts
to provide short-term liquidity against future debt service
and other expenditure requirements.
Contractual relationships
The Company operates within a contractual relationship
with its primary customer, East Renfrewshire Council. A
significant impairment of this relationship could have
a direct and detrimental effect on the Company's results
and could ultimately result in termination of the concession.
To manage this risk the Company has regular meetings with
East Renfrewshire Council including discussions on performance,
project progress, future plans and customer requirements.
The Directors do not believe that the Company is exposed
to any significant Financial Risk. The Company's principal
activity as detailed above is low risk as all relationships
with the customer, funders and sub-contractors within the
Company in which it sits are determined by the terms of
the respective contracts.
Future Developments
The Directors expect the general level of activity to remain
stable in the forthcoming year. There have been no other
changes to the Company's activities in the year under review
and no others are currently contemplated.
This report was approved by the board on July 2017 and
signed by its order.
Patrick McCarthy
Company Secretary
CONNECT M77/GSO PLC
Registered number: 04698798
Directors' Report
for the year ended 31 March
2017
The Directors present their annual report together with
the audited financial statements of the Company for the
year ended 31 March 2017.
The following information has been disclosed in the Strategic
Report:
1. Principal Activity and Business Review
2. Key Performance Indicators
3. Principal Risks and Uncertainties
4. Indication of likely future developments in the business
Results & Dividends
The audited financial statements for the year ended 31
March 2017 are set out on pages 9 to 24. The profit for
the year after taxation was GBP42,000 (2016 - profit of
GBP18,500,000).
The directors declared and paid dividends of GBPnil (2016
- GBPnil). The Directors expect the Company to continue
its operations for the foreseeable future.
Going Concern
The Company's forecasts and projections, taking account
of reasonable possible changes in trading performance,
show that the Company has adequate resources to continue
in operational existence for the foreseeable future. Accordingly,
the Directors continue to adopt the going concern basis
in preparing the financial statements. Further information
is provided in note 1 to the financial statements.
Directors
The following persons served as directors throughout the
year and up to the date of this report:
D. W. Bowler
M. P. Mageean (appointed on 01/08/16)
M. J. Edwards (appointed on 24/01/17)
D. G. Blanchard (appointed on 20/06/17)
A. Dean (resigned on 21/03/17)
L. J. Falero (resigned on 02/09/16)
B. R. Walker (resigned on 01/08/16)
Directors' Indemnities
The Company has made qualifying third party indemnity provisions
for the benefit of its Directors which remain in force
at the date of this report.
Provision of Information to
Auditors
Each of the persons who is a Director at the date of approval
of this report confirms that:
(i) so far as the Director is aware, there is no relevant
audit information of which the Company's auditor is unaware;
and
(ii) the Director has taken all the steps that he ought
to have taken as a Director in order to make himself aware
of any relevant audit information and to establish that
the Company's auditor is aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of s418 of the Companies
Act 2006.
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.
This report was approved by the board on July 2017 and
signed by its order.
Patrick McCarthy
Company Secretary
CONNECT M77/GSO PLC
Directors' Responsibilities Statement
The Directors are responsible for preparing the Strategic
Report, the Directors' Report and the financial statements
in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law they
have elected to prepare the Company 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 the profit or loss 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 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 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 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.
CONNECT M77/GSO PLC
Independent auditor's report
to the members of CONNECT M77/GSO
PLC
We have audited the financial statements of Connect M77/GSO plc
for the year ended 31 March 2017 set out on pages 9 to 24. The
financial reporting framework that has been applied in their preparation
is applicable law and UK Accounting Standards (UK Generally Accepted
Accounting Practice), including FRS 102 The Financial Reporting
Standard applicable in the UK and Republic of Ireland.
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 Directors' Responsibilities Statement
set out on page 7, 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 Auditing
Practices Board'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 the accounts
In our opinion the accounts:
-- give a true and fair view of the state of the Company's affairs
as at 31 March 2017 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 matters prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and
the Directors' Report for the financial year is consistent with
the financial statements.
Based solely on the work required to be undertaken in the course
of the audit of the financial statements and from reading the
Strategic report and the Directors' report:
-- we have not identified material misstatements in those reports;
and
-- in our opinion, those reports have been prepared in accordance
with the Companies Act 2006.
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.
Tom Eve (Senior Statutory Auditor)
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
July 2017
CONNECT M77/GSO PLC
Profit and Loss Account
for the year ended 31 March
2017
Notes 2017 2016
GBP '000 GBP '000
Turnover 2 2,245 14,941
Cost of sales (1,902) (8,804)
Gross profit 343 6,137
Administrative expenses (240) (290)
Operating profit 3 103 5,847
Interest receivable and
similar income 4 9,718 81
Gain on reclassification
of Financial Asset 8 - 27,428
Interest payable and other
expenses 5 (9,882) (10,462)
(Loss)/Profit before taxation (61) 22,894
Tax on (loss)/profit 6 103 (4,394)
Profit for the financial
year 42 18,500
============ ==============
There were no items recognised in Other Comprehensive
Income in either year other than the reported profit /
(loss) shown above; consequently no separate statement
of other comprehensive income is presented.
All activities are from continuing operations in the
United Kingdom.
Continuing operations
None of the Company's activities were acquired or discontinued
during the above two financial years.
CONNECT M77/GSO PLC
Balance Sheet
as at 31 March 2017
Notes 2017 2016
GBP '000 GBP '000
Current assets
Financial asset: amounts
falling due within one year 8 1,265 955
Debtors: due within one year 9 117 1,764
Investments: due within one
year 10 15,944 16,624
Financial asset: amounts
falling due after one year 8 124,002 125,592
Cash and cash equivalents 3,030 1,227
Total Assets 144,358 146,162
------------- ---------------
Current liabilities
Creditors: due within in
one year 11 (5,080) (5,749)
------------- ---------------
Total current liabilities (5,080) (5,749)
Net Current Assets
(including GBP124,002K (2016:GBP125,592K)
due after one year) 139,278 140,413
============= ===============
Non-current liabilities
Creditors: due after one
year 12 (166,816) (167,890)
Deferred tax liability 12 (1,557) (1,660)
------------- ---------------
Total non-current liabilities (168,373) (169,550)
Total liabilities (173,453) (175,299)
------------- ---------------
Net Liabilities (29,095) (29,137)
============= ===============
Capital and reserves
Called up share capital 14 50 50
Profit and loss account (29,145) (29,187)
Shareholders' deficit (29,095) (29,137)
============= ===============
These financial statements for Connect M77/GSO plc,
company registration number 04698798, were approved
by the Board of Directors and authorised for issue on
July 2017 and signed on its behalf by:
Mark Mageean
Director
Approved by the board on
July 2017
CONNECT M77/GSO PLC
Statements of Changes in Equity
for the year ended 31 March 2017
Proift
Called Up and Loss
Share capital account Total
GBP '000 GBP '000 GBP '000
At 31 March 2015 50 (47,687) (47,637)
----------------- ------------ -----------
Profit for the year - 18,500 18,500
At 31 March 2016 50 (29,187) (29,137)
----------------- ------------ -----------
Profit for the year - 42 42
At 31 March 2017 50 (29,145) (29,095)
================= ============ ===========
CONNECT M77/GSO PLC
Notes to the Financial Statements
for the year ended 31 March
2017
1 Accounting policies
a) Basis of preparation
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 amendments issued to FRS 102 in July 2015 have been
applied.
The financial statements are prepared in sterling, which is the
functional currency of the Company. Monetary amounts in these financial
statements are rounded to the nearest GBP'000.
The Company's parent undertaking, Connect M77/GSO Holdings Limited
includes the Company in its consolidated financial statements.
The consolidated financial statements of Connect M77/GSO Holdings
Limited are available to the public and may be obtained from the
address in note 16.
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 preparation
of a Cash Flow Statement and related notes.
As the consolidated financial statements of Connect M77/GSO Holdings
Limited include the equivalent disclosures, the Company has also
taken the exemptions under FRS 102 available in respect of the
following disclosures:
The disclosures required by FRS 102.11 Basic Financial Instruments
and FRS 102.12 Other Financial Instrument Issues in respect of
financial instruments not falling within the fair value accounting
rules of Paragraph 36(4) of Schedule 1.
The Company proposes to continue to adopt the reduced disclosure
framework of FRS 102 in its next financial statements.
The accounting policies set out below have, unless otherwise stated,
been applied consistently to all periods presented in these financial
statements.
The financial statements have been prepared on the historical cost
convention. The principal accounting policies adopted are set out
below.
These financial statements for the year ended 31 March 2016 are
the first financial statements of Connect M77/GSO Holdings Limited
prepared in accordance with FRS 102. The Financial Reporting Standard
applicable in the UK and Republic of Ireland. The date of transition
to FRS 102 was 1 April 2014. The impact of this transition has
been disclosed in Note 22.
b) Going Concern
The current economic conditions create some general uncertainty.
The Directors have reviewed the Company's supply chain and do not
believe that any specific risk has been identified. The Directors
have also considered the ability of the Authority to continue to
pay unitary fees due under the concession contract to the Company's
subsidiary and do not consider this to be a material risk. The
Company's forecasts and projections, taking account of reasonably
possible counterparty performance, show the Company expects to
be able to continue to operate for the full term of the concession.
Despite the Company showing net liabilities the Company's projections,
taking account of reasonably possible counterparty performance,
show that the Company expects to be able to continue to operate
for the foreseeable future. Accordingly, they continue to adopt
the going concern basis in preparing the annual report and financial
statements.
1 Accounting policies (continued)
c) Financial Asset
A deed of variation was signed at 31 March 2016 with the client
East Renfrewshire Council replacing the demand element of the payment
mechanism (based on actual traffic usage) with a fixed usage payment
for the remaining life of the concession. Because all of the revenue
is now based on availability the accounting basis was reclassified
from fixed asset to finanical asset. The Company accounts as a
financial asset in accordance to Section 11 of FRS 102 for a basic
financial instrument and is measured at amortised cost.
d) Other Financial Assets
The Company has elected to apply the provisions of Section 11 'Basic
Financial Instruments' and Section 12 'Other Financial Instruments
Issues' of FRS 102 to all of its financial instruments. Financial
assets are recognised in the Company's balance sheet when the Company
becomes party to the contractual provisions of the instrument.
Financial assets have been classified as 'loans and receivables',
which includes cash and cash equivalents. The classification depends
on the nature and purpose of the financial assets and is determined
at the time of recognition.
Basic financial assets, which include trade and other receivables
and cash and bank balances, are initially measured at transaction
price including transaction costs and are subsequently carried
at amortised cost using the effective interest method, unless the
arrangement constitutes a financing transaction, where the transaction
is measured at the present value of the future receipts discounted
at a market rate of interest. Other financial assets classified
as fair value through profit or loss are measured at fair value.
Trade receivables and other receivables that have fixed or determinable
payments that are not quoted in an active market are also classified
as 'loans and receivables'. Loans and receivables are measured
at amortised cost using the effective interest rate method, less
any impairment. Interest income is recognised by applying the effective
interest rate except for short term receivables where the recognition
of interest would be immaterial.
Cash and cash equivalents comprise cash on hand, demand deposits,
and other short term highly liquid investments, that are readily
convertible into cash and are subject to an insignificant risk
of change in value.
Financial assets are impaired where there is objective evidence
that as a result of one or more events that have occurred after
the initial recognition of the financial asset, the estimated future
cash flows have been impacted. The carrying amount of a financial
asset is reduced by the impairment directly with the exception
of trade receivables which would be reduced through the use of
an allowance account, unless it is considered that it is uncollectible.
The Company derecognises a financial asset only when the contractual
rights to receive the cash flows from the asset expire, or it transfers
the financial asset and substantially all the risk and rewards
of ownership of the asset to another entity.
Accounting policies (continued)
e) Financial Liabilities
Financial liabilities and equity are classified according to the
substance of the contractual arrangements entered into. Financial
liabilities, including borrowings, are initially measured at fair
value, net of transaction costs and are subsequently measured at
amortised cost using the effective interest rate method, with interest
expense recognised on an effective yield basis. The Company derecognises
its financial liabilities when the Company's obligations are discharged,
cancelled or they expire.
The effective interest rate method is a method of calculating amortised
costs of the financial liabilities and allocating interest expense
over the relevant period. The effective interest rate is the rate
that exactly discounts the estimated future cash payments through
the expected life of the financial liabilities.
f) Taxation
Current tax is provided at amounts expected to be paid or recovered
using the tax rates and laws that have been enacted, or substantively
enacted, by the balance sheet date. Deferred tax is provided in
full on timing differences which result in an obligation at the
balance sheet date to pay more tax, or a right to pay less tax,
at a future date, at rates expected to apply when they crystallise
based on current tax rates and law. Timing differences arise from
the inclusion of items of income and expenditure in taxation computations
in periods different from those in which they are included in financial
statements. Unrelieved tax losses and other deferred tax assets
are recognised only to the extent that, on the basis of all available
evidence, it can be regarded as more likely than not there will
be suitable taxable profits from which the future reversal of the
underlying timing differences can be deducted.
Deferred tax is measured using the tax rates and laws that have
been enacted or substantively enacted by the balance sheet date
that are expected to apply to the reversal of the timing difference.
Where items recognised in other comprehensive income or equity
are chargeable to or deductible for tax purposes, the resulting
current or deferred tax expense or income is presented in the same
component of comprehensive income or equity as the transaction
or other event that resulted in the tax expense or income.
g) Finance Costs
Finance costs in relation to the fixed rate senior secured bonds
and the secured loan stock are recognised using the effective interest
rate method under FRS 102 whereby expected interest over the life
of the project is spread and recognised in each period.
Financial assets and financial liabilities are recognised in the
Company's balance sheet when the Company becomes party to the contractual
provisions of the instrument.
Financial assets have been classified as 'loans and receivables',
which includes cash and cash equivalents, based on the nature and
purpose of the financial assets.
h) Fixed rate senior secured
bonds
Senior secured bonds 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.
1 Accounting policies (continued)
i) Critical accounting judgements and key sources
of estimation uncertainty
Critical judgements
In the application of the Company's accounting policies, the directors
are required to make judgements, estimates and assumptions about
the carrying amount of assets and liabilities that are not readily
apparent from other sources. The estimates and associated assumptions
are based on historical experience and other factors that are considered
to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised where the revision affects
only that period, or in the period of the revision and future periods
where the revision affects both current and future periods.
Key sources of estimation
uncertainty
The estimates and assumptions which have a significant risk of
causing a material adjustment to the carrying amount of assets
and liabilities are as follows.
Service concession arrangement
The Company accounts for the project as a service concession arrangement.
The directors have used their judgement in selecting the appropriate
accounting basis for the concession. As the payment mechanism is
now based on a fixed usuage, the Directors deemed it suitable for
the accounting basis to be changed from a fixed asset to a financial
asset as at 31st March 2016. The directors use their judgement
in selecting the appropriate financial asset rate to be applied
in order to allocate the income received between revenue, and capital
repayment of and interest income on the financial asset; and also
the service margin that is used to recognise service revenue. The
directors have also used their judgement in assessing the appropriateness
of the future maintenance costs that are included in the Company's
forecasts. The directors will continue to monitor the condition
of the assets and undertake a regular review of maintenance spend.
2 Analysis of turnover
Turnover
Turnover by origin and destination:
2017 2016
GBP '000 GBP '000
United Kingdom 2,245 14,941
2,245 14,941
========== =========
All activities are from continuing operations
in the United Kingdom.
3 Operating Profit
Operating profit is stated
after charging:
2017 2016
GBP '000 GBP '000
Fees payable to the Company's auditor
for the audit of the Company's annual
financial statements 13 16
Total audit fees 13 16
Depreciation - 5,175
--------- ---------
The Directors received no salary, fees or other benefits in the
performance of their duties in the current and preceding year.
All staff costs are borne by the shareholders of Connect M77/GSO
Holdings Limited who second employees to the Company and charge
related service costs. The Company had no employees during the
year (2016 - none). The audit fee for the Company was amounted
to GBP13,000 payable to KPMG LLP (2016: GBP16,000 payable to Deloitte
LLP).
Interest receivable and similar
4 income 2017 2016
GBP '000 GBP '000
Interest on bank accounts
and deposits 61 81
Finance income 9,657 -
9,718 81
========= =========
Interest payable and other
5 expenses 2017 2016
GBP '000 GBP '000
Secured bond interest 7,376 8,025
Secured loan stock interest 2,506 2,437
Total interest payable and
similar charges 9,882 10,462
========= =========
6 Tax (charge)/credit on profit/(loss)
The tax (charge)/credit is based on the profit/(loss)
for the year and comprises:
2017 2016
GBP '000 GBP '000
Current tax
Corporation tax due - (4,579)
Total current tax - (4,579)
Deferred tax
Tax on current year losses
deferred 12 -
Effect of changes in tax
rate 91 185
--------- ---------
Total deferred tax 103 185
Total tax (charge)/credit
on profit/(loss) 103 (4,394)
The difference between the total current tax shown above and the
amount calculated by applying the standard rate of UK corporation
tax to the profit/(loss) before tax is as follows:
Tax (charge)/credit on profit/(loss)
6 (continued)
2017 2016
GBP '000 GBP '000
Profit / (Loss) before tax (61) 22,894
Tax on profit / (loss) on ordinary
activities at standard UK corporation
tax rate of 20% 12 (4,579)
Effects of:
Changes in tax rate 91 185
------------ ------------
103 (4,394)
============ ============
A reduction in the UK corporation tax rate from 21% to 20% (effective
from 1 April 2015) was substantively enacted on 2 July 2013. Further
reductions to 19% (effective from 1 April 2017) and to 18% (effective
1 April 2020) were substantively enacted on 26 October 2015, and
an additional reduction to 17% (effective 1 April 2020) was substantively
enacted on 6 September 2016. This will reduce the company's future
current tax charge accordingly. The deferred tax assets at 31 December
2016 has been calculated based on these rates.
7 Tangible fixed assets
DBFO Roads
2017 2016
GBP '000 GBP '000
Cost
Opening balance - 156,480
Transfer to Financial Asset - (156,480)
------------ ------------
Closing balance - -
Depreciation
Opening balance - 52,186
Charge for the year - 5,175
Transfer to Financial Asset - (57,361)
------------ ------------
Closing balance - -
Net book value - -
============ ============
8 Financial Asset 2017 2016
GBP '000 GBP '000
Opening balance 126,547 -
Service Income received in
the year (13,826)
Construction and related
costs 2,889
Notional interest 9,657
Additions at fair value - 126,547
--------- ---------
Closing Balance 125,267 126,547
========= =========
2017 2016
GBP '000 GBP '000
Comprising:
Amounts falling due within
one year 1,265 955
Amounts falling due after more than
one year 124,002 125,592
--------- ---------
125,267 126,547
========= =========
A deed of variation was signed at 31 March 2016 with the client
East Renfrewshire Council to replace the demand element of the
payment mechanism (based on actual traffic usage) with a fixed
usage payment for the remaining life of the concession. Because
all of the revenue will now be based on availability the accounting
basis has been reclassified from fixed asset to finanical asset.
The initial fair value, and associated gain on re-classification
has been calculated on net present value of forecast operating
cashflows, discounted by 8.0% on post-tax cash flows.
9 Debtors
2017 2016
GBP '000 GBP '000
Due within one year:
Trade debtors 116 1,764
116 1,764
Investments - due within
10 one year
Investments due within one year represent amounts held on deposit
> 3 months with a financial institution which are not available
for withdrawal within that time and, in accordance with the Company's
funding arrangements, are restricted and cannot be used to fund
the on-going operations of the Company. There are GBPnil amounts
held on deposit > 3 months. Restriced cash includes:
Debt Service Reserve: GBP8,133K
Tax Reserve: GBP7,811K
Creditors: due within one
11 year
2017 2016
GBP '000 GBP '000
Trade creditors 101 160
Accruals 1,538 1,619
VAT payable 184 221
Fixed rate guaranteed senior
secured bonds 3,257 3,029
Corporation tax payable - 720
5,080 5,749
========= =========
Creditors: due after more
12 than one year
2017 2016
GBP '000 GBP '000
Fixed rate guaranteed senior
secured bonds 132,587 135,845
Less: unamortised arrangement
fees (2,351) (2,027)
--------- ---------
130,236 133,818
Secured loan stock 14,865 14,865
Secured loan stock interest 21,715 19,207
36,580 34,072
166,816 167,890
========= =========
Deferred taxation
2017 2016
GBP '000 GBP '000
Opening deferred tax asset/(liability) (1,660) 2,013
Current year credit to the statement
of comprehensive income 12
Current year disallowed depreciation - 97
Utilisation of losses - (3,955)
Effect of change in tax rate 91 185
Closing deferred tax asset/(liability) (1,557) (1,660)
========= =========
Movement At 31
At 1 April in the March
2016 year 2017
Trading losses - 10 10
Capitalised Interest (1,660) 93 (1,567)
(1,660) 103 (1,557)
------------ --------- ---------
12 Creditors: amounts falling due after more than
one year (continued)
Fixed rate guaranteed senior secured bonds due 2034 of GBP152,429,000
were issued on 7 May 2003. The bonds have been unconditionally
and irrevocably guaranteed by Syncora Guarantee (UK) Limited (formerly
XL Capital Assurance (UK) Limited) for payment of principal and
interest.
Interest on the bonds is payable semi-annually in arrears on 31
March and 30 September in each year at a fixed rate of 5.404% per
annum commencing on 30 September 2003.
Unless previously redeemed or purchased and cancelled, the bonds
will mature on 31 March 2034 and are subject to redemption in part
from, and including, 30 September 2006 in accordance with the amortisation
schedule set out in the bonds offering circular.
The secured loan stock bears interest at 12.1% per annum and accrues
from the date of final completion. It is redeemable in instalments
between 2015 and 2035, or as the Company elects, but subject to
certain restrictions in the collateral deed. The secured loan stock
issued by the Company is held by the Company's immediate parent
companies. The Company's immediate parent companies have waived
their rights to receive interest within 12 months for the years
ending 31 March 2016 and 31 March 2017.
All borrowings contain either a fixed or varying security interest
over the assets of the Company, as defined by an intercreditor
agreement. The bonds have certain covenants attached.
Fixed rate guaranteed senior secured bonds are stated net of unamortised
issue costs of GBP1,851,000 (2016 - GBP2,028,000). The Company
incurred total issue costs of GBP4,403,000 in respect of the fixed
rate bonds. These costs, together with the interest expense, are
allocated to the profit and loss amount over the term of the bonds.
Interest is calculated using the effective interest rate method.
The Company has committed borrowing facilities available of GBP167,294,000
which have been fully drawn as at 31 March 2017 (2016 - GBP167,294,000).
2017 2016
GBP '000 GBP '000
Fixed rate guaranteed senior
secured bonds 135,844 138,873
Secured loan stock 14,865 14,865
150,709 153,738
=========== ==========
The borrowings are repayable
as follows:
2017 2016
GBP '000 GBP '000
Repayable within one year 3,257 3,029
Repayable between one and
two years 3,911 3,257
Repayable between two and
five years 14,458 13,063
Repayable after five years 129,083 134,389
150,709 153,738
=========== ==========
Financial instruments and
13 derivatives
The Company's financial instruments are shown in the table below.
The main purpose of these financial instruments is to raise finance
for the construction and operation of the DBFO roads. The Company
has not entered into derivative transactions. It is, and has been
throughout the year under review, the Company's policy that no
trading in financial instruments shall be undertaken. The main
risks arising from the Company's financial instruments are market,
credit and liquidity risk. The Board reviews and agrees policies
for managing each of these risks and they are summarised below.
The Company has no foreign currency transactions. All the Company's
borrowings are denominated in sterling.
The carrying values of financial assets
are as follows:
Book Value Fair Value
2017 2016 2017 2016
GBP '000 GBP '000 GBP '000 GBP '000
Loans and receivables
Investments - due within
one year 15,944 16,624 15,944 16,624
Cash at bank 3,030 1,227 3,030 1,227
Trade and other receivables 117 1,764 117 1,764
Financial Asset 125,267 126,547 179,480 126,547
Total financial assets 144,358 146,162 198,571 146,162
=========== ========== ========= =========
The fair values of financial assets are calculated using discounted
cash flows with market assumptions, unless carrying value is used
to approximate fair value.
The carrying values of financial liabilities
are set out below:
Book Value Fair Value
2017 2016 2017 2016
GBP '000 GBP '000 GBP '000 GBP '000
Financial liabilities at
amortised cost
Trade and other payables 3,381 2,018 3,381 2,018
Borrowings 172,424 172,947 204,603 172,359
Total financial liabilities 175,805 174,965 207,984 174,377
=========== ========== ========= =========
Financial instruments and derivatives
13 (continued)
Market value has been used to determine the fair value of the fixed
rate bonds. The independent valuation from the market for the fixed
rate bonds was provided by Royal Bank of Canada, the bond manager.
The fair value of the fixed rate bonds traded in an active market
is determined with reference to quoted market prices at the balance
sheet. The quoted market price used for the fixed rate bonds is
the current bid price. It is categorised as level one in hierarchy
for fair value disclosure as the price is quoted in an active market.
The fair value of the finance asset and the secured loan stock
have been calculated by discounting the expected future cash flows
at prevailing interest rates. The UK gilt curve has been used in
calculating the appropriate discount rate. It is categorised as
level two in hierarchy for fair value disclosure as it is derived
indirectly from the movement in the UK gilt curve.
The fair value of cash at bank, trade and other receivables, and
trade and other payables approximate to the carrying values beacuse
of the short maturity of these instruments.
Credit risk
The Company's principal financial assets are cash and short-term
deposits and trade and other receivables. The credit and cash flow
risks are not considered significant as the client is a quasi-governmental
organisation.
For cash and short-term deposits, only independently rated counterparties
with a minimum medium term senior debt rating of at least A from
Standard & Poors and A3 from Moody's are accepted. The maximum
exposure to credit risk is the carrying value of the financial
assets in the table above
Interest rate risk
The Company has no exposure to interest rate risk as all its borrowings
are at a fixed rate of interest. The fixed rate bonds have interest
payable at 5.404% per annum and the secured loan stock has interest
payable at 12.1% per annum. Interest rate risk arises on the Company's
cash and short term deposits. A 50 basis point increase/decrease
in the interest rate on each term deposit held would lead to an
increase/decrease of GBP94,444 (2016: GBP83,119) in the Company's
net interest receivable.
Liquidity risk
The Company's liquidity risk is principally managed through financing
the Company by means of long term borrowings with an amortising
profile that matches the expected availability of funds from the
Company's operating activities.
Financial liabilities gross maturity
The following table details the Company's remaining contractual
maturities for its financial liabilities. The table has been drawn
up based on the undiscounted cash flows of financial liabilities
based on the earliest date on which the Company can be required
to make payments. The table includes both interest and principal
cash flows.
Financial instruments and derivatives
13 (continued)
Non-derivative financial liabilities
gross maturity
Other Other Total
borrowings financial non-
liabilities derivative
liabilities
2017 2017 2017
GBP '000 GBP '000 GBP '000
Due on demand or within one
year (10,789) (100) (10,889)
Due within one to two years (11,251) - (11,251)
Due within two to five years (35,029) - (35,029)
Due after more than five
years (202,947) (21,715) (224,662)
------------ ------------- -------------
(260,016) (21,815) (281,831)
============ ============= =============
Other Other Total
borrowings financial non-
liabilities derivative
liabilities
2016 2016 2016
GBP '000 GBP '000 GBP '000
Due on demand or within one
year (11,245) (674) (11,919)
Due within one to two years (11,061) (272) (11,333)
Due within two to five years (36,250) (18,422) (54,672)
Due after more than five
years (225,815) - (225,815)
------------ ------------- -------------
(284,371) (19,368) (303,739)
============ ============= =============
Capital risk management
The Company manages its capital to ensure its ability to continue
as a going concern, to meet the requirements of its collateral
deed 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 and profit and loss account as disclosed in Note 14 and
cash and cash equivalents and borrowings as disclosed in Notes
11, 12 and 13. The Company has complied with capital requirements
imposed by the collateral deed throughout the year. There have
been no changes in the Company's management of capital from previous
years.
14 Called-up share capital 2017 2016
GBP '000 GBP '000
Allotted, called-up and fully
paid
42,500 class A ordinary
shares of GBP1 each 43 43
7,500 class B ordinary shares
of GBP1 each 7 7
50 50
============= =============
The shareholders' percentage holdings in the Company at 31 March
2017 are as follows:
Balfour Beatty Infrastructure Investments Class A ordinary shares
Limited 100%
Cricketdrift Limited Class B ordinary shares
100%
Both classes of equity rank 'pari passu' in respect of voting,
dividends and other rights.
15 Capital commitments 2017 2016
GBP '000 GBP '000
Contracted but not provided
for 75 188
75 188
=========== ==========
Ultimate parent companies and controlling
16 parties
The Company's immediate parent company is Connect M77 Holdings
Limited, which is incorporated in Great Britain and registered
in England and Wales. The ultimate parent companies and controlling
parties are Balfour Beatty plc and BIIF LP (acting by its manager,
3i BIFM Investments Ltd) which are incorporated in the United Kingdom
and registered in England and Wales. The registered offices of
the controlling parties are 5 Churchill Place, Canary Wharf, London,
E14 5HU and 16 Palace Street, London, SW1E 5JD respectively.
The Company is a wholly-owned subsidiary of Connect M77 Holdings
Limited which is registered in England and Wales. The largest and
smallest Company in which the results of Connect M77/GSO plc are
consolidated is Connect M77/GSO Holdings Limited, copies of whose
financial statements are available from it's registered office;
350 Euston Road, London NW1 3AX.
17 Related party transactions 2017 2016
GBP '000 GBP '000
Balfour Beatty Civil Engineering -
operation and maintenance 2,734 3,710
Balfour Beatty Investments - staff
secondment charges 136 200
2,870 3,910
=========== ==========
Outstanding balances at the
end of the year
Balfour Beatty Civil Engineering -
operation and maintenance 146 180
Balfour Beatty Investments - staff
secondment charges 685 549
831 729
=========== ==========
Click on, or paste the following link into your web browser, to
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This information is provided by RNS
The company news service from the London Stock Exchange
END
ACSOKDDQQBKDFON
(END) Dow Jones Newswires
July 31, 2017 10:58 ET (14:58 GMT)
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