TIDM54WW
RNS Number : 3124B
Cambridgeshire Housing Cap PLC
19 September 2018
Company Registration Number: 09102394
Cambridgeshire Housing Capital plc
Report and Financial Statements
For the year ended 31 March 2018
Contents
Statutory information 2
Strategic report 3 - 4
Directors' report 5 - 7
Corporate governance statement 8 - 9
Independent auditor's report 10 - 14
Statement of income and retained earnings 15
Statement of financial position 16
Notes to the financial statements 17 - 23
Statutory information
Company registration number 09102394
Directors Claire Higgins
Michael Heekin
Donald Bell
Edmund Smy
Gerard Wright (resigned 17 July 2017)
Secretary Claire Higgins
Registered Office c/o Cross Keys Homes Shrewsbury Avenue
Peterborough Cambridgeshire
PE2 7BZ
Independent Auditor KPMG LLP
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
Bankers Royal Bank of Scotland plc
1st Floor
Conqueror House
Vision Park
Histon
Cambridge
CB24 9NL
Solicitors Trowers & Hamlins LLP
3 Bunhill Row
London
EC1Y 8YZ
Strategic report
Business review and key performance indicators
The Company was incorporated during 2014 as a subsidiary of
Cross Keys Homes Limited. The major purpose of the Company is to
support the parent company's objectives. The parent company was
established in 2004 and offers social and affordable housing in and
around Peterborough together with other tenant related
services.
In September 2014 the Company issued a 31 year GBP150 million
bond. The initial issue sold GBP105 million of the bond. In 2016
the remaining GBP45 million retained bond was sold at a premium of
GBP4.3 million. The bond carries an interest rate of 4.25% and is
repayable in 2045. In September 2014 the net proceeds of the bond
(less issue costs and the premium on issue) were on lent to Cross
Keys Homes Limited immediately. In 2016 the proceeds of the sale
less the premium element of the retained bond was lent on
immediately. In March 2018 the premium element of the retained bond
sale was lent on to CKH at an interest rate of 4.25%.
Given the Company's major objective and strategy is to support
the parent company's operation the directors assess the Company's
success by reference to the parent company's performance. In
addition to the bond, the remaining debt of the parent company
comprised of a mix of fixed, variable, cancellable and interest
linked loans totalling GBP139.4 million. This is in compliance with
established treasury management limits, which have been designed to
manage the group's exposure to interest rate fluctuations.
The group treasury policy and associated procedures were updated
to reflect the new environment as surplus proceeds from the bond
were invested with a range of counterparties, including AAA rated
Money Market Funds and banks/building societies, for periods
ranging from instant access to 12 months, ensuring sufficient
liquidity is maintained to meet operational cash flow
requirements.
The parent company ended the year with a loan/bond and overdraft
arrangements totaling GBP289.4 million and external cash
investments of GBP37 million. Further details of the loan balances
can be found in the group financial statements.
The gearing ratio, calculated as net debt divided by the
historic cost of housing properties decreased to 54.85% (2017 -
55.2%). The group's borrowing arrangements require compliance with
a number of financial and non-financial covenants. The group's
position is monitored on an on-going basis and reported to the
board regularly. Recent reports confirm that the group was in
compliance with its loan covenants at the reporting date and
throughout the year and that the board expects the parent company
and the group to remain compliant in the foreseeable future.
Principal risks and uncertainties
The principal risks facing the Company are:
-- the inability to meet its obligations in respect of the Bond Trust Deed; and
-- counterparty risk from the parent company.
The risks facing the parent company could also have a material
effect on the performance of Cambridgeshire Housing Capital plc.
These include:
-- welfare reform;
-- risk that the operating surplus of the parent company does
not perform in line with its business plan; and
-- the risk that the loan covenants are breached.
Strategic report (continued)
Management of these risks is controlled by:
-- monitoring the operating surplus of the parent company and
how it has performed against the business plan;
-- review of factors that may impact operating surpluses
including Welfare Reform; such factors increase the risk that the
cash flow obligations may not be met;
-- monitoring the covenants for both actual and anticipated performance.
Financial risk management policies and objectives
The group uses various financial instruments, including loans
and cash to raise finance for the group's operations. There are no
non-basic financial instruments nor any exposure to exchange rates.
The existence of these financial instruments does expose the group
to some other financial risks. The risks arising from the group's
financial instruments are considered by the directors to be
interest rate risk, liquidity risk and credit risk. The parent
company board review and agree policies for managing each of these
risks and they are summarised below:
Interest rate and inflation risks
The group finances its operations through a mixture of retained
surpluses, bank borrowings and capital market bonds. The group's
exposure to interest fluctuations on its borrowings is managed by
the use of both fixed and variable rate facilities, including
interest rate swap instruments. The treasury policy permits fixed
rate loans to be within a range of 50%-90% of total loans. The
reason for such a large range is to provide flexibility in managing
both interest rate and inflation risk together.
Liquidity risk
The group seeks to manage financial risk by ensuring sufficient
liquidity is available to meet foreseeable needs and invest cash
assets safely and profitably. At year end the group held cash
balances totaling GBP37m with a current ratio of 2.5 (2017 -
4.0).
Credit risk
The group's principal credit risk relates to tenant arrears.
This risk is managed by providing support to eligible tenants with
their application for Housing Benefit and closely monitors the
arrears of self-funding tenants. Welfare Reform and resulting
changes to the benefits system has been identified as a key risk to
the group, and a project team assesses the impact of emerging
changes.
The Company's exposure to the above risks is considered to be
mitigated by the terms of the bond agreement.
Future developments
The Directors do not anticipate any change in the Company's
principal activity. No further bond issues are planned in the next
twelve months.
..........................................
Donald Bell
Chair
11 June 2018
Directors' report
The Directors submit their Report and the audited Financial
Statements for the year ended 31 March 2018.
Directors
The directors who served the Company during the year were as
follows:
-- Claire Higgins
-- Michael Heekin
-- Donald Bell
-- Edmund Smy
-- Gerard Wright (resigned 17 July 2017)
-- Sarah Ireland (appointed 17 July 2017 resigned 4 September 2017)
In accordance with the Company's Articles of Association, none
of its Directors are required to retire. None of the Directors who
held office at the beginning or end of the year had any interest in
the shares of the Company.
Distribution of profits
The Directors recommend that a gift aid donation to the parent
company will be made following approval of the financial
statements. The amount to be paid will be determined at a Board
meeting.
Statement of directors' responsibilities in respect of the
strategic report, directors' report and the financial statement
The directors are responsible for preparing the Strategic
Report, the Directors' Report and 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 are
required to prepare the financial statements in accordance with UK
accounting standards, including FRS 102 The Financial Reporting
Standard applicable in the UK and Republic of Ireland.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of its profit or
loss for that period. In preparing 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;
-- assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
-- use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
its financial statements comply with the Companies Act 2006. They
are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
Directors' report (continued)
Under applicable law and regulations, the directors are also
responsible for preparing a Strategic Report and Directors' Report
that complies with that law and those regulations.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility statement of the directors in respect of the
annual financial report
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the company; and
-- the strategic report includes a fair review of the
development and performance of the business and the position of the
issuer, together with a description of the principal risks and
uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position and
performance, business model and strategy.
Going concern
The Company's business activities, its principal risks and
uncertainties and factors likely to affect its future position are
set out within the Strategic Report. We consider that there are no
events since the financial year-end that have had an important
effect on the financial position of the group.
The financial support available to the Company from the parent
company gives reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable
future. For this reason, it continues to adopt the going concern
basis in the financial statements.
Viability statement
As required by the provisions of the UK Corporate Governance
Code the Directors have assessed the viability of the company over
a three year period due to the longer nature of the liabilities
within the issued bond.
The Group produces a 30 year business plan with a five year
detailed outlook. The Business Plan is stress tested to ensure that
all loan repayments will continue to be met under adverse
conditions with mitigating actions identified to manage any
downturn in the operating environment. The Group's business plan is
also assessed as part of regulatory review by the Social Housing
Regulator and assessed by Standard & Poors credit rating
agency. The management framework is regularly reviewed and
updated.
The Group Board manages risk the key risks identified within the
Strategic Report through a risk management framework which is
regularly reviewed and updated. The liquidity of the group is
strong with GBP37m of cash at the year end and GBP75m of undrawn
loan facilities ensuring that the no additional borrowing is
required under the current business plan. No refinancing will be
required under the approved business plan for over 3 years.
The bond holders have a legal charge over properties which are
secured against the loan.
The director's view is that all liabilities will be able to be
met as they fall due over the forthcoming three year period.
Directors' report (continued)
Report of the Audit & Risk Committee
The Audit & Risk Committee is responsible for the review of
internal controls of the group, the oversight of the work of
internal audit, reviewing the accounting policies and any reports
of fraud, bribery or money laundering. The Audit & Risk
Committee also reviews and feeds back on the work of the external
auditors. The Committee are satisfied that the key personnel from
KPMG involved in delivering the audit service demonstrate the
appropriate level of objectivity and independence.
Inability to service debt
The Audit & Risk Committee considers that the principal risk
facing the company is the inability of the Group to service debt
and repay the debt as it falls due. Management gave assurance that
the risk is mitigated and that the group can service debt as the
group has internal control arrangements in place as well as strong
liquidity position with GBP37m cash and GBP75m of undrawn bank
facilities as at 31 March 2018. The Business Plan is stress tested
to ensure that all loan repayments will continue to be met under
adverse conditions with mitigating actions identified to manage any
downturn in the operating environment.
The Group's business plan is also assessed as part of regulatory
review by the Social Housing Regulator and assessed by Standard
& Poors credit rating agency. The management framework is
regularly reviewed and updated.
The Audit & Risk Committee considered the key audit matter
identified by the auditors and it is considered below.
The CKH board questioned management on the proposed business
plan and were satisfied that CKH could service debt when if falls
due. The Audit & Risk Committee considers the work of internal
and external audit and the appointment of external auditors in the
scope of their work. It also considers the risk management
framework, internal control framework and compliance issues. It
reports to the Board on the effectiveness of internal controls and
considers statutory accounts before they are presented to the
Board. The liquidity position and cash flow forecasts are examined
by the Finance Committee and the Board regularly.
Disclosure of information in the strategic report
Information concerning the business review, key performance
indicators, principal risks and uncertainties, financial risk
management policies and objectives and future developments is
included within the Strategic Report.
Auditors
KPMG LLP have expressed their willingness to continue in office.
Accordingly a resolution in accordance with section 489(4) of the
Companies Act 2006 is to be proposed for the re-appointment of KPMG
LLP.
Signed on behalf of the Board of Directors
....................................
Claire Higgins
Secretary
11 June 2018
Registered in England - No. 9102394
Corporate governance statement
The Company has a listed security in issue and is required to
comply with the applicable sections DTR 7.1 and DTR 7.2 of the
Financial Services Authority ("FSA") handbook.
The Company does not comply with the UK Corporate Governance
Code. However, we have reported on our Corporate Governance
arrangements by drawing on best practice available, including those
aspects of the UK Corporate Governance Code we consider to be
relevant to the Company and best practice.
The Board and its Directors
The Company is led by a Board of Directors ("Board"). The
appointment of the Directors is pursuant to the Articles of
Association dated 25 June 2014.
Each Director is of equal standing. Owing to the size and nature
of the Company, there is no appointed Chief Executive. There is
also no distinction drawn between executive and non-executive
Directors.
As the Board all have considerable experience within the Social
Housing sector, and also act in various capacities for the Cross
Keys Homes Group, the Company does not arrange any formal induction
or training for new Directors. This arrangement is reviewed on an
on-going basis to consider its appropriateness.
The Directors are covered by the Cross Keys Homes Group's
directors' and officers' indemnity insurance policy.
The Board acknowledges that it is collectively responsible for
the success of the Company by providing leadership, setting the
Company's strategic aims, ensuring that the necessary financial and
human resources are in place and reviewing management
performance.
In order to discharge these responsibilities, the Directors have
met three times during the year covered by these financial
statements. The table below indicates the number of meetings held
and the number of meetings attended by each Director.
Number of meetings held in
year 3
Claire Higgins 3
Donald Bell 2
Michael Heekin 3
Edmund Smy 3
Gerard Wright (to 17 July
2017) 1
Sarah Ireland 0
All Directors receive appropriate and timely information and
briefing papers in advance of the Board Meetings. Day to day
management of the Company is delegated to the Cross Keys Homes
Limited's directors' team under Group Standing Orders
arrangements.
Corporate governance statement (continued)
The Board and its Directors (continued)
Appointments to the Board are made in line with the Articles of
Association. The parent company, Cross Keys Homes Limited has a
Performance and Governance committee that provides oversight for
the entire Cross Keys Homes Group of companies which includes
Cambridgeshire Housing Capital plc. The Company does not have a
separate and dedicated Nominations and Remuneration committee as
the size and nature of the Company does not warrant a dedicated
committee but relies on the Group Performance & Governance
committee for this function.
The Board does not undertake a formal annual evaluation of its
performance and that of its Directors and there is no formal policy
on re-election of Directors. The Directors, however, ensure that
the Board is structured in such a way that each member of the Board
is able to bring different experiences and skills to the operation
of the Company and encourages and supports each Director to
regularly update and refresh their skills and knowledge.
Internal control and risk management systems
The Board has established processes for identifying, evaluating
and managing the significant risks the Company faces. The Board
regularly reviews these processes, which have been in place from
the commencement of trading to the date of approval of this report.
The risks are also reviewed quarterly during the Cross Keys Homes
Group Audit and Risk Committee meetings.
The Board is responsible for the Company's system of internal
control and for reviewing its effectiveness. Such a system is
designed to manage rather than eliminate the risk of failure to
achieve business objectives, and can only provide reasonable and
not absolute assurance against material misstatement or loss.
The Board's monitoring covers all controls, including financial,
operational and compliance controls and risk management to ensure
it meets the minimum requirements of DTR 7.1.3. It is based
principally on reviewing financial and operational reports from
management to consider whether significant risks are identified,
evaluated, managed and controlled and whether any significant
weaknesses are promptly remedied or indicate a need for more
extensive monitoring.
As part of the requirements of DTR 7.1.3 the Board specifically
monitors the financial reporting process and the statutory audit of
the annual accounts through reports provided by management.
Furthermore, the Board reviews and monitors the independence of the
statutory auditor and considers the relationship with Cross Keys
Homes Limited as part of its assessment. This is monitored as part
the Cross Keys Homes Group Board meetings which consider the
relationship with the statutory auditor and all group
subsidiaries.
The Board members regularly review whether the existing internal
controls to monitor the requirements of DTR 7.1.3 are sufficient
and take appropriate action as necessary.
The Board has not identified nor been advised of any failings or
weaknesses which it has determined to be significant during the
course of its review of the systems of internal control.
The Board considers the existing internal controls to be
sufficient and in view of the small number of transactions does not
consider there to be a requirement for a specific Cambridgeshire
Housing Capital plc internal audit function. The requirement for a
dedicated internal audit function is considered annually.
Independent auditor's report to the members of Cambridgeshire
Housing Capital plc
1 Our opinion is unmodified
We have audited the financial statements of Cambridgeshire
Housing Capital plc ("the Company") for the year ended 31 March
2018 which comprise the Statement of Income and Retained Earnings,
the Statement of Financial Position and the related notes,
including the accounting policies in note 3.
In our opinion the financial statements:
-- give a true and fair view of the state of the Company's
affairs as at 31 March 2018 and of its result for the year then
ended;
-- have been properly prepared in accordance with UK accounting
standards, including FRS 102 The Financial Reporting Standard
applicable in the UK and Republic of Ireland ; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion. Our audit opinion is consistent with our report to the
audit committee.
We were appointed as auditor by the directors on 12 February
2018. This is our first year of engagement as auditors of the
Company. We have fulfilled our ethical responsibilities under, and
we remain independent of the Company in accordance with, UK ethical
requirements including the FRC Ethical Standard as applied to
listed public interest entities. No non-audit services prohibited
by that standard were provided.
2 Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional
judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. We summarise below
the key audit matter in arriving at our audit opinion above,
together with our key audit procedures to address this matter and,
as required for public interest entities, our results from those
procedures. This matter was addressed, and our results are based on
procedures undertaken, in the context of, and solely for the
purpose of, our audit of the financial statements as a whole, and
in forming our opinion thereon, and consequently are incidental to
that opinion, and we do not provide a separate opinion on this
matter.
Recoverability of fixed asset investment
Fixed asset investment - GBP152m (2017: GBP148m)
Refer to page 7 (Audit and Risk Committee's Report), note 3,
pages 16-18 (accounting policies) and note 9, page 20 (financial
disclosures).
The risk - low risk high value
The Company's primary activity is to issue bonds, source
investor financing and on-lend to the Parent. It therefore has long
term liabilities which relate to the bonds issued and long term
intercompany debtors which relate to the loans provided to the
Parent.
The carrying amount of the long term intercompany debtor balance
represents 99.7% of the Company's total assets. Their
recoverability is not at a high risk of significant misstatement or
subject to significant judgement. However, due to their materiality
in the context of the Company financial statements, this is
considered to be the area that had the greatest effect on our
overall Company audit.
Whilst there are small amounts of financial income and financial
expense during the loan period, the risk mainly stems from the
expectation of the ability of the Parent to repay the loan in 27
years.
Our response
Our procedures included:
i. Assessment of Recoverability: Assessing 100% of intercompany
long term debtors owed by the Parent to identify, with reference to
the Parent's financial draft balance sheet, whether they have a
positive net asset value and sufficient headroom to cover the debt
owed, and that future cash flow plans include repayment of the
debt.
ii. Test of detail: Assessing the creditor recognised by the
Parent and comparing it to the debtor recognised by the
company.
iii. Test of detail: Assessing the balance on-loaned to the
group with reference to the bond issue funds and the onward loan
document between the Company and the Parent.
iv. Confirmation of value: Obtained a confirmation letter from
the counterparty to assess the gross, net and repayment date of the
loan to the Parent.
Our results
We found the Company's assessment of the recoverability of the
fixed asset investment balance to be acceptable.
3 Our application of materiality and an overview of the scope of our audit
Cambridgeshire Housing Capital PLC is part of a Group headed by
Cross Keys Homes Limited. Materiality of GBP1m, as communicated by
the Group audit team, has been applied to the audit of the
Company.
We agreed to report to the Audit and Risk Committee any
corrected or uncorrected identified misstatements exceeding
GBP50,000, in addition to other identified misstatements that
warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level
specified above and was all performed at the Company's head office
in Peterborough.
4 We have nothing to report on going concern
We are required to report to you if we have concluded that the
use of the going concern basis of accounting is inappropriate or
there is an undisclosed material uncertainty that may cast
significant doubt over the use of that basis for a period of at
least twelve months from the date of approval of the financial
statements. We have nothing to report in these respects.
5 We have nothing to report on the other information in the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or, except as explicitly stated below, any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
Strategic report and directors' report
Based solely on our work on the other information:
-- we have not identified material misstatements in the
strategic report and the directors' report;
-- in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
-- in our opinion those reports have been prepared in accordance
with the Companies Act 2006.
Corporate governance disclosures
Based solely on our work on the other information described
above:
-- with respect to the Corporate Governance Statement
disclosures about internal control and risk management systems in
relation to financial reporting processes and about share capital
structures:
-- we have not identified material misstatements therein; and
-- the information therein is consistent with the financial statements; and
-- in our opinion, the Corporate Governance Statement has been
prepared in accordance with relevant rules of the Disclosure
Guidance and Transparency Rules of the Financial Conduct
Authority.
We are also required to report to you if a corporate governance
statement has not been prepared by the Company. We have nothing to
report in these respects.
6 We have nothing to report on the other matters on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you
if, in our opinion:
-- adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the financial statements are not in agreement with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
7 Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 5,
the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing the
Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going
concern basis of accounting unless they either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud, other irregularities (see
below), or error, and to issue our opinion in an auditor's report.
Reasonable assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements
can arise from fraud, other irregularities or error and are
considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities.
Irregularities - ability to detect
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the financial
statements from our sector experience, and through discussion with
the directors (as required by auditing standards), and from
inspection of the entity's transactions.
We had regard to laws and regulations in areas that directly
affect the financial statements including financial reporting
(including related company legislation) and taxation legislation.
We considered the extent of compliance with those laws and
regulations as part of our procedures on the related financial
statement items.
In addition we considered the impact of laws and regulations in
the specific areas of anti-bribery, regulatory capital and
liquidity and certain aspects of company legislation recognising
the financial and regulated nature of the company's activities and
its legal form. With the exception of any known or possible
non-compliance, and as required by auditing standards, our work in
respect of these was limited to enquiry of the directors and
inspection of the entity's transactions.
We communicated identified laws and regulations throughout our
team and remained alert to any indications of non-compliance
throughout the audit.
As with any audit, there remained a higher risk of non-detection
of non-compliance with relevant laws and regulations
(irregularities), as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls.
8 The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members, as a body,
for our audit work, for this report, or for the opinions we have
formed.
Sarah Brown (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham B4 6GH
Date:
Statement of income and retained earnings for the year ended 31
March 2018
Notes 2018 2017
GBP000 GBP000
Turnover - -
Operating profit - -
Interest receivable and similar income 6 6,439 6,137
Interest payable and similar charges 7 (6,290) (6,013)
Profit on ordinary activities before taxation 149) 124)
Taxation 8 - (25)
Profit after taxation 149) 99
======== ========
Retained earnings at the beginning of the year 99 -
Profit for the year 149) 99
Gift aid distribution (124) -
Tax relief on gift aid distribution 25 -
Retained earnings at the end of the year 149) 99
======== ========
The above relates wholly to continuing operations.
There is no difference between the result on ordinary activities
before taxation and the result for the year stated above and their
historic cost equivalent.
There were no items of other comprehensive income in either the
current or previous year.
The notes on pages 17 to 23 form part of these financial
statements.
Statement of financial position as at 31 March 2018
Notes 2018 2017
GBP000 GBP000
Fixed asset investment 9 152,372 148,289
Current assets
Debtors - amount falling due within
one year 10 299) 297)
Cash at bank 159) 4,306
458) 4,603
Creditors - amounts falling due within
one year 11 (297) (322)
Net current assets 161) 4,281
Total assets less current liabilities 152,533 152,570
Creditors - amounts falling due after
more than one year 12 (152,372) (152,459)
Net assets 161) 111)
========== ==========
Capital and reserves
Called-up share capital 13 12 12
Retained earnings 15 149) 99
Shareholders' funds 161) 111)
========== ==========
These financial statements were approved and authorised by the
Directors for issue on 11 June 2018.
Signed on behalf of the Board of Directors
..........................................
Claire Higgins
Director
Company Registration Number: 09102394
The notes on pages 17 to 23 form part of these financial
statements.
Notes to the Financial Statements
1. Statutory information
Cambridgeshire Housing Capital plc is a public company, limited
by shares and registered in England and Wales (no. 09102394). The
Company's registered office is c/o Cross Keys Homes, Shrewsbury
Avenue, Peterborough, PE2 7BZ.
2. Statement of compliance
The financial statements have been prepared in accordance with
the provisions of Financial Reporting Standard 102, "The Financial
Reporting Standard applicable in the United Kingdom and Republic of
Ireland" (United Kingdom Generally Accepted Accounting
Practice).
3. Accounting policies
3.1 Basis of preparation
The financial statements have been prepared on the going concern
basis, under the historical cost convention and in accordance with
the Companies Act 2006.
The financial statements are presented in Sterling, the
functional currency of the entity, rounded to the nearest
thousand.
3.2 Going concern
The directors have assessed the ability of the Company to
continue to operate as a going concern based on the Company being a
non-trading holding Company, which has the continuing support of
its parent undertaking.
After reviewing the Company's forecasts and projections, the
directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for the
foreseeable future, being a period of not less than 12 months from
the date of approval of these financial statements. The Company
therefore continues to adopt the going concern basis in preparing
its financial statements.
3.3 Disclosure exemptions
The Company is a qualifying entity for the purposes of FRS 102
as it is a member of a group that prepares publically-available
consolidated financial statements, and this Company's results are
included in the consolidation.
The following disclosure exemptions have been adopted in
accordance with the exemptions detailed in paragraph 1.12 of FRS
102:
a) The requirement to present a reconciliation of the number of
shares outstanding at the beginning and end of the year
b) The requirement to present a statement of cash flows
c) Financial instruments disclosures, including categories of
financial instruments and exposure to and management of financial
risks
In addition, details of transactions between wholly-owned
subsidiaries are not included, as per the disclosure exemption
provided by paragraph 33.1A.
Notes to the financial statements (continued)
3. Accounting policies (continued)
3.4 Interest receivable and similar income
Interest receivable is recognised as interest accrues, using the
effective interest method (that is the rate that exactly discounts
estimated future cash receipts through the expected life of the
financial instrument to the net carrying amount of the financial
asset).
3.5 Taxation
The current tax charge is based on the results for the year and
is measured at the amounts expected to be paid based on the tax
rates and laws substantially enacted by the reporting date. Current
tax is recognised in the Statement of income and retained earnings
for the year.
3.6 Investments
Investments are measured at cost less accumulated
impairment.
3.7 Financial instruments - initial recognition
Loans and other financial instruments are recorded in the
Statement of financial position at the amount of the gross
proceeds, less the initial cost of raising the finance which is
amortised over the period of the loan using the effective interest
rate.
Financial assets and liabilities are recognised when the Company
becomes a party to the contractual provisions of the financial
instrument and are measured initially at fair value adjusted for
transaction costs.
Issue costs and discounts/premiums on the issue of the bond are
recognised in profit or loss over the life of the bond.
3.8 Financial assets
Financial assets classed by the Company as loans and receivables
include fixed asset investments and cash.
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. Loans and receivables are measured subsequent to initial
recognition at amortised cost, discounted at a rate equal to the
original effective rate, less provision for impairment. Any change
in their value through impairment or reversal of impairment is
recognised in the statement of income and retained earnings.
Provision against financial assets is made when there is
objective evidence that the Company will not be able to collect all
amounts due to it in accordance with the original terms of those
receivables. The amount of the write-down is determined as the
difference between the asset's carrying amount and the present
value of estimated future cash flows discounted at the original
effective rate. An assessment for impairment is undertaken at least
at each reporting date.
Notes to the financial statements (continued)
3. Accounting policies (continued)
3.9 Financial liabilities
Financial liabilities are obligations to pay cash or other
financial assets and are recognised when the Company becomes a
party to the contractual provisions of the instrument.
Financial liabilities are measured subsequent to initial
recognition at amortised cost using discount of the original
effective rate, with interest-related charges recognised as an
expense in finance cost in the Statement of income and retained
earnings. Finance charges, including premiums payable on settlement
or redemption and direct issue costs, are charged to the Statement
of income and retained earnings on an accrual basis using the
effective interest method and are added to the carrying amount of
the instrument to the extent that they are not settled in the year
in which they arise.
Financial liabilities are de-recognised only when the obligation
is extinguished, that is, when the obligation is discharged or
cancelled or expires.
3.10 Adoption of new accounting policy
The company has elected to early-adopt the amendments to FRS 102
paragraphs 29.14A and 29.22A arising from the 2017 triennial
review. The impact of the new policy is to allow the recognition of
the income tax relief that would be obtained from a gift aid
distribution made by the company to its charitable parent as at the
reporting date, provided that it is probable that the gift aid
payment will be made to the parent within nine months of the
reporting date.
Furthermore, the tax income will be recognised within profit or
loss as opposed to being presented in equity, where the gift aid
distribution that will result in the tax income will be shown.
4. Judgements in applying accounting policies and key sources of
estimation uncertainty
Preparation of financial statements requires management to make
significant judgements and estimates. The items in the financial
statements where these judgements and estimates have been made
include:
-- The ability of Cross Keys Homes Limited to make interest
payments or principal payments when they fall due. This is
mitigated through a secure loan agreement backed by assets owned by
Cross Keys Homes Limited. This is also backed by a long term
business plan with a positive trajectory.
-- The bond and the intercompany debtor are classified as basic
financial instruments. This is following a review of the details
and terms of the bond issue and the on-lending agreement. No terms
have been identified which would cause the bond and intercompany
debtor to fail the basic classification criteria according to
section 11 of FRS 102.
5. Operating profit
None of the Directors received any remuneration as Directors
from the Company during the year. The Company has no directly
employed personnel.
Audit fees of GBP5,500 plus VAT (2017 - GBP10,000 plus VAT) and
other administrative expenses are borne by Cross Keys Homes
Limited, the ultimate parent undertaking.
Notes to the financial statements (continued)
6. Interest receivable and similar income
2018 2017
GBP000 GBP000
Interest on fixed asset investments 6,377 6,059
Unwinding of discounts on NPV 60 60
Bank deposit interest receivable 2 18
6,439 6,137
-------- --------
In September 2014 the Company issued a 31 year GBP150 million
bond. The initial issue sold GBP105 million of the bond. In 2016
the remaining GBP45 million retained bond was sold at a premium of
GBP4.3 million. The bond carries an interest rate of 4.25% and is
repayable in 2045. In September 2014 the net proceeds of the bond
(less issue costs and the premium on issue) were on lent to Cross
Keys Homes Limited immediately. In 2016 the proceeds of the sale
less the premium element of the retained bond was lent on
immediately. In March 2018 the premium element of the retained bond
sale was lent on to CKH at an interest rate of 4.25%.
7. Interest payable and similar charges
2018 2017
GBP000 GBP000
Bond interest payable 6,375 6,059
Unwinding of discounts on NPV (87) (62)
Interest payable to group undertakings - 16
Bank fees 2 -
6,290 6,013
-------- --------
8. Taxation
2018 2017
GBP000 GBP000
Current tax
UK current tax expense - 25
--------------- --------
Notes to the financial statements (continued)
8. Taxation (continued)
The tax assessed for the year is lower than the standard rate of
corporation tax in the UK of 19% (2017 - 20%):
2018 2017
GBP000 GBP000
Profit on ordinary activities
before tax 149 124
------------ ------------
Profit on ordinary activities before
tax multiplied
by standard rate of corporation tax
in the UK of
19% (2017 - 20%) 28 25
Tax relief that will be obtained by
distribution to charitable (28) -
parent company
Total tax charge for the year - 25
-------- ------------
The company intends to make a gift aid distribution of GBP149k
to its charitable parent company, Cross Keys Homes Ltd, within nine
months of the year end. The gift aid payment will be made from
distributable reserves, which are expected to be sufficient to
cover this amount. The effect of the anticipated distribution will
be to reduce the corporation tax payable to nil. In accordance with
the updated provisions of FRS 102, the tax effect of the intended
distribution is recognised in the current year's financial
statements.
9. Fixed asset investments
2018 2017
GBP000 GBP000
As at 1 April 2017 148,289 103,229
Additions 4,022 45,000
Unwinding of discounts on NPV 61 60
As at 31 March 2018 151,372 148,289
---------- ---------
During the year the company on-lent the remaining surplus from
the premium realised on the sale of retained bonds to its parent
company.
The loan to the parent company is considered to be a fixed asset
investment as it is intended for use on a continuing basis in the
Company's activities. The Directors consider such loans to be held
for the long term over the life of the related debt.
The amounts stated above are all due in more than one year. The
total amount repayable on maturity is GBP150,000,000.
10. Debtors - amount falling due within one year
2018 2017
GBP000 GBP000
Amounts due from group undertakings 299 297
-------- --------
Notes to the financial statements (continued)
11. Creditors - amount falling due within one year
2018 2017
GBP000 GBP000
Corporation tax - 25
Accrued expenses 297 297
297 322
-------- --------
12. Creditors - amounts falling due after more than one year
2018 2017
GBP000 GBP000
Bonds 150,000 150,000
Less issue price discount (1,650) (1,710)
Add retained bond issue price premium 4,022 4,169
-------- --------
Total 152,372 152,459
======== ========
Security has been given on amounts due to the Bond investors
amounting to GBP150,000,000. The nature of this security is Cross
Keys Homes Limited's housing stock.
The repayment profile of the bonds is as follows:
Less More
On demand than 1 to than 2018
GBP000 12 months 5 years 5 years Total
GBP000 GBP000 GBP000 GBP000
Amounts due to the
Bond investors - 6,375 25,500 293,438 325,313
------------- ----------- ---------- --------- ---------
Amounts due to the Bond Investors reflects the gross payments
(including interest) due on the GBP150,000,000 bonds that have been
issued to external investors.
13. Called up share capital
2018 2017
Authorised GBP000 GBP000
50,000 shares of GBP1 each 50 50
-------- --------
Allocated issued and partly paid
50,000 shares of GBP1 each 25p paid 12 12
-------- --------
Upon incorporation the Company issued 50,000 shares of which 25p
was paid to provide working capital to establish the business.
All shares rank pari passu in all regards.
14. Reserves
Retained earnings - includes all current and prior period
retained profit and losses.
Notes to the financial statements (continued)
15. Reconciliation of movement in shareholders' funds
2018 2017
GBP000 GBP000
Opening shareholders' funds 111 12
Results for the year 149) 99
Gift aid distributions less tax relief
obtained (99)
Closing shareholders' funds 161) 111
-------- --------
16. Related party transactions
In accordance with paragraph 33.1A of FRS 102, no related party
transactions are disclosed as all such transactions were between
wholly-owned subsidiaries of the Group.
17. Ultimate parent undertaking
Cambridgeshire Housing Capital plc is a wholly-owned subsidiary
of Cross Keys Homes Limited, which is the ultimate parent and
ultimate controlling entity. Cross Keys Homes Limited is the
smallest and largest entity in the group that produces consolidated
financial statements. Consolidated financial statements of Cross
Keys Homes Limited can be obtained from the Company Secretary at
Cross Keys Homes, Shrewsbury Avenue, Peterborough, PE2 7BZ.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
ACSUKUVRWNAKAAR
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September 19, 2018 12:44 ET (16:44 GMT)
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