Source - RNS
RNS Number : 9738K
NewHospitals (St.Helens & Knowsley)
30 September 2016
 

Company Registration No. 05610559 (England and Wales)

 

NEWHOSPITALS (ST HELENS & KNOWSLEY) FINANCE PLC

 

ANNUAL REPORT AND FINANCIAL STATEMENTS

 

FOR THE YEAR ENDED 31 MARCH 2016


Directors

Mr N Crowther

 

 

Mr D Brooking

 

 

Secretary

HCP Social Infrastructure (UK) Ltd

 

Company number

05610559

 

Registered office

8 White Oak Square

 

London Road

 

Swanley

 

Kent

 

BR8 7AG

 

Auditor

KPMG LLP

 

66 Queen Square

 

Bristol

 

BS1 4BE


 

 

Page

 

Strategic report

1 - 4

 

Directors' report

5

 

Directors' responsibilities statement

6

 

Independent auditor's report to the members of NewHospitals (St Helens & Knowsley) Finance Plc

7

 

Profit and loss and other comprehensive income

8

 

Balance sheet

9

 

Notes to the financial statements

10 - 20


The directors present the strategic report and financial statements for the year ended 31 March 2016.

 

 

Business Review

The Company's principal activities are the raising of finance through the issue of index-linked bonds, an index-linked bank loan and unsecured subordinated loan stock and the onward loan of the proceeds, with identical terms for the payment of interest and principal, to a fellow subsidiary undertaking of the Company's immediate parent undertaking, NewHospitals (St Helens & Knowsley) Limited. The directors are not aware, at the date of this report, of any likely major changes in the Company's activities in the next year.

 

On 7 June 2006, the Company authorised the creation of £178,300,000 of 1.7774% Index-Linked Guaranteed Secured Bonds due 2047 of which £153,000,000 were issued. It also entered into a loan agreement with the European Investment Bank (the "EIB") under which the EIB granted £149,186,000 of a 1.743% index-linked guaranteed secured bank loan due 2038. The bond and bank loan are index-linked to movements in the UK All Items Retail Prices Index (the "UK RPI"). The bonds and bank loan have the benefit of an unconditional and irrevocable financial guarantee as to all payments of interest and principal issued by the monoline insurer Assured Guaranty (Europe) Limited (formerly Financial Security Assurance (UK) Limited).

 

On 7 June 2006, NewHospitals (St Helens & Knowsley) Limited entered into a Project Agreement with the St Helens & Knowsley Teaching Hospitals NHS Trust (the "Trust"), together with an associated construction contract, funding agreements, hard and soft services contracts, a medical equipment supplies contract and other ancillary project related agreements. The Project Agreement requires NewHospitals (St Helens & Knowsley) Limited to provide and maintain two new hospital facilities for the Trust, and to deliver certain non-clinical services in the existing and new facilities over a 41 year concession term under the Government's Private Finance Initiative ("PFI").

 

On 28 March 2008, £6,800,000 of the remaining £25,300,000 Index-Linked Guaranteed Secured Bonds created but not issued, the "Committed Variation Bonds", were cancelled as they expired on 31 December 2007 in accordance with the terms of the Bond Trust Deed and Collateral Deed.

 

On 26 May 2009 the shareholders of the Company's immediate parent commenced subscription for tranches of unsecured 11.96% fixed interest subordinated loan stock created, constituted and issued by the Company, on 7 June 2006. This subordinated loan stock totalled £29,490,000 and was fully subscribed as at 31 March 2011. During the year to 31 March 2016 two loan stock redemptions were paid to the Company's shareholders leaving a balance of subordinated loan stock as at 31 March 2016 totalling £20,914,000.

 


Key performance indicators

Historical performance

The Group is obliged to meet the conditions laid down in the Bond Trust Deed and Collateral Deed with Assured Guaranty, European Investment Bank and Deutsche Trustee Company Limited. To the best of the directors' knowledge the Group has met all of the obligations contained within these Deeds and there have been no Events of Default, Potential Events of Default or Trigger Events with regard to the Collateral Deed in the year to 31 March 2016.

 

Financial performance and financial position

 

The loss for the year, after taxation, amounted to £nil (2015: £nil). The directors are unable to recommend the payment of a dividend (2015: £nil). Financial penalties are levied by the St Helens & Knowsley Teaching Hospitals NHS Trust (the "Trust") on the Group in the event of performance standards not being achieved in accordance with the detailed criteria as set out in the Project Agreement.  All deductions are passed on to the contracted service providers and the quantum of the penalties is an indication of the level of performance. During the year ended 31 March 2016 service performance deductions totalling £38,683 were levied for Steady State services (2015: £58,753).This represents 0.19% (2015: 0.29%) of the total revenues on the Group from the service providers for the provision of the services.

 

The directors have modelled the anticipated financial outcome of the Project over the 41 year concession term and this has shown the project to be profitable and cash generative. The directors monitor actual financial performance against this anticipated performance. Financial covenants have been met during the year and, having considered the anticipated future performance and position of the Company, the directors are of the opinion that the covenants will continue to be met in the future, and the Company will therefore continue in business.

 


Principal risks and uncertainties

The risk management policy of the Company is designed to identify and manage risk at the earliest possible point. The Company maintains a detailed risk register which is formally reviewed on a quarterly basis. 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 the Company's contractual obligations.

 

Financial instrument risks

 

The Company's financial instruments comprise index-linked bonds, an index-linked bank loan, a fixed rate subordinated loan, and a fixed rate intercompany debtor and an index-linked intercompany debtor, both due from NewHospitals (St Helens & Knowsley) Limited. NewHospitals (St Helens & Knowsley) Limited services these intercompany loans with cash flows generated under the Project Agreement.

 

The financial structure has been established to ensure that the cash flows from NewHospitals (St Helens & Knowsley) Limited's PFI hospital concession assets are sufficient to meet all interest and principal payments due on the index-linked and fixed rate debt. During the year NewHospitals (St Helens & Knowsley) Limited met its debt service obligations to the Company. Based upon the projected future cash flows of NewHospitals (St Helens & Knowsley) Limited, the directors consider that it will be able to meet its obligations to the Company as they fall due for the foreseeable future. Further details are given in note 9 to the financial statements.

 

The Company does not undertake financial instrument transactions which are speculative or unrelated to the Company's trading activities. Board approval is required for the use of any new financial instrument, and the Company's ability to enter into any new transaction is constrained by covenants in its existing funding agreements. Exposure to market related interest rate risk, cash flow risk, credit risk and liquidity risk arises in the normal course of the Company's business. The Company's exposure to, and the management of, these risks is described in further detail as follows:

 

Market related interest rate risk

The Company is exposed to market related interest rate risk in relation to its index-linked debt through movements in the UK RPI. This is mitigated as the onloans due from NewHospitals St Helens & Knowsley) Limited are also index-linked through movements in the UK Retail Price Index published by the Office of National Statistics. NewHospitals (St Helens & Knowsley) Limited can service these onloans as the majority of the cash flows generated from the Trust increase in line with movements in the UK RPI. An analysis of the Company's financial instruments which are subject to interest rate risk is detailed in note 7 to the financial statements.

 

Cash flow risk

The Company is exposed to cash flow risk in relation to variability in long term cash inflows due under the onloan agreements with NewHospitals (St Helens & Knowsley) Limited. This is mitigated as the cash inflows due under the onloan agreements with NewHospitals (St Helens & Knowsley) Limited exactly match the cash outflows required to service the Company's financial liabilities. NewHospitals (St Helens & Knowsley) Limited's exposure to variability in long terms cash inflows generated under the concession with the Trust is mitigated as performance and availability deductions are passed on to the relevant service providers and the majority of revenues and costs which the Company receives and pays are index-linked to movements in the UK RPI.

 


Principal risks and uncertainties (continued)

Credit risk

 

Credit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge an obligation under the contract giving rise to the financial instrument. The Company's long term exposure to credit risk, which exists predominantly until the end of the Project Agreement, is principally dependent on the credit worthiness of the account bank, Lloyds Bank Plc ("Lloyds"), which holds the Group's cash balances. Lloyds must hold a minimum short term debt rating of A-1 (or better) issued by Standard & Poor's and P-1 (or better) issued by Moody's. Should the ratings fall below these levels the Company and its senior lenders each have the right to request that an acceptable replacement bank be appointed. The Company actively monitors the credit ratings of its account bank and reports are issued on a monthly basis. The Company's maximum credit risk exposure relating to its financial assets is represented by their carrying value at the balance sheet date.

 

The Company's other long term exposure to credit risk is principally dependent on the creditworthiness of the Trust as the Group's sole client. The risk associated with this is mitigated as the cash flows are secured under the Project Agreement, which is a long term contract with the Trust, whose obligations and liabilities are effectively underwritten by UK Government.

 

Interest rate risk/inflation risk

All borrowings are at a fixed rate other than index-linking, and therefore no interest rate risk arises on them. Interest rate risk arises on the Company's cash and short term deposits. The majority of the Company's borrowings comprise an index-linked secured bond and an index-linked secured loan. Repayment of these loans, and meeting operational expenditure commitments, will be made from income which is itself subject to indexation. The Company thereby mitigates any exposure to movements in the UK All Items Retail Prices Index.

 

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulties in meeting obligations associated with its financial liabilities. The Company's liquidity risk is principally managed through financing by means of long term borrowings which are tailored to match the expected cash flows arising. In addition the Group maintains a debt service reserve bank account to provide short term liquidity against future debt service requirements.

 

 

 

On behalf of the board

 

 

Mr N Crowther

Director

21 September 2016


The directors present their annual report and financial statements for the year ended 31 March 2016.

 

 

 

Principal activities

 

The Company's principal activities are the raising of finance through the issue of index-linked bonds, an index-linked bank loan and unsecured subordinated loan stock and the onward loan of the proceeds, with identical terms for the payment of interest and principal, to a fellow subsidiary undertaking of the Company's immediate parent undertaking, NewHospitals (St Helens & Knowsley) Limited.

 

 

 

Directors

 

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

 

 

 

Mr N Crowther

 

 

Mr D Brooking

 

 

 

Results and dividends

 

The results for the year are set out on page 8.

 

 

 

Directors' interests

 

No director had any share interest in the issued share capital of the Company at 31 March 2016 (2015: £nil)

 

 

 

Qualifying third party indemnity provisions

The company has made qualifying third party indemnity provisions for the benefit of its directors during the year. These provisions remain in force at the reporting date.

 

 

Auditor

The auditor, KPMG LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

 

Statement of disclosure to the auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company's auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company's auditor is aware of that information.

 

 

Going concern

The directors have reviewed the Company's projected cash flows contained in the financial model covering accounting periods up to 31 March 2048. The directors have also examined the current status of the Company's principal contracts and likely developments in the foreseeable future. Having reviewed the forecast cashflow and financial facilities available to the Company, the directors consider the Company will be able to meet its loan covenant requirements and settle its liabilities as they fall due and accordingly the financial statements have been prepared on a going concern basis.

 

 

Registered office

The Company's registered office is 8 White Oak Square, London Road, Swanley, Kent, BR8 7AG.

 

On behalf of the board

 

Mr N Crowther

Director

21 September 2016


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 the directors have prepared the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including The Financial Reporting Standard Applicable in the UK and Republic of Ireland (FRS 102).

 

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

 

·      select suitable accounting policies and then apply them consistently;

·      make judgements and accounting estimates that are reasonable and prudent;

·      state whether applicable United Kingdom Accounting Standards, including FRS 102 have been followed, subject to any material departures disclosed and explained in the financial statements;

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006.

 

They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 


We have audited the financial statements of NewHospitals (St Helens & Knowsley) Finance Plc for the year ended 31 March 2016 set out on pages 8 to 20. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), 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 6, 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 financial statements

 

In our opinion the financial statements:

·      give a true and fair view of the state of the company's affairs as at 31 March 2016 and of its result for the year then ended;

·      have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

·      have been prepared in accordance with the requirements of the Companies Act 2006.

 

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

 

 

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

 

·      adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

·      the financial statements are not in agreement with the accounting records and returns; or

·      certain disclosures of directors' remuneration specified by law are not made; or

·      we have not received all the information and explanations we require for our audit.

 

Huw Brown (Senior Statutory Auditor)

for and on behalf of KPMG LLP, Statutory Auditor

 

Chartered Accountants

66 Queen Square

Bristol

BS1 4BE

 

27 September 2016


 

2016

 

2015

 

 

Notes

 

£000

 

£000

 

 

Interest receivable and similar income

4

 

16,214

 

18,621

 

Interest payable and similar charges

5

 

(16,214)

 

(18,621)

 

 

 

 

 

 

 

Profit before taxation

-

 

-

 

 

Taxation

6

 

-

 

-

 

 

 

 

 

 

 

 

Total comprehensive profit for the financial year

 

 

-

 

-

 

 

 

 

 

 

 

 

The profit and loss account has been prepared on the basis that all of the results relate to continuing operations.

 

There was no other comprehensive income recognised in either the current year of previous year.

 

The notes on pages 10 to 20 form part of these financial statements.

 

 


 

2016

 

2015

 

 

Notes

£000

£000

£000

£000

 

 

Current assets

 

Debtors falling due after one year

8

347,920

 

357,936

 

Debtors falling due within one year

8

12,500

 

11,771

 

 

 

 

 

 

 

 

 

360,420

 

369,707

 

Creditors: amounts falling due within one year

 

 

Loans and borrowings

9

12,500

 

11,771

 

 

 

 

 

 

 

 

Net current assets

347,920

 

357,936

 

 

Creditors: amounts falling due after more than one year

 

Loans and borrowings

9

344,707

 

354,438

 

Other creditors

10

3,163

 

3,448

 

 

 

 

 

(347,870)

 

 

 

(357,886)

 

 

 

 

 

 

 

Net assets

 

50

 

50

 

 

 

 

 

 

 

 

Capital and reserves

 

Called up share capital

11

 

50

 

50

 

 

 

 

 

 

 

 

The notes on pages 10 to 20 form part of these financial statements.

 

 

The financial statements were approved by the board of directors and authorised for issue on 21 September 2016 and were signed on its behalf by:

 

 

Mr N Crowther

 

Director

 

 

Company Registration No. 05610559

 


1

Accounting policies

 

 

Company information

 

NewHospitals (St Helens & Knowsley) Finance Plc ("The Company") is a limited company domiciled and incorporated in England and Wales. The registered office is 8 White Oak Square, London Road, Swanley, Kent, BR8 7AG.

 

 

1.1

Accounting convention

 

These financial statements have been prepared in accordance with FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" ("FRS 102") and the requirements of the Companies Act 2006.

 

The presentation currency of these financial statements is sterling. All amounts in the financial statements have been rounded to the nearest £1,000.

 

 

 

These financial statements for the year ended 31 March 2016 are the first financial statements of NewHospitals (St Helens & Knowsley) Finance Plc 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 reported financial position and financial performance for the previous period are not affected by the transition to FRS 102.

 

 

 

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements.  On first time adoption of FRS 102, the Company has not retrospectively changed its accounting under old UK GAAP for accounting estimates.

 

 

 

The Company's parent undertaking, NewHospitals (St Helens & Knowsley) Holdings Limited includes the Company in its consolidated financial statements. The consolidated financial statements of NewHospitals (St Helens & Knowsley) Holdings Limited are prepared in accordance with FRS102 and are available to the public and may be obtained from Companies House, Crown Way, Cardiff, CF14 3UZ.

 

In these financial statements, the company is considered to be a qualifying entity (for the purposes of this FRS) and has applied the exemptions available under FRS 102 in respect of the preparation and disclosure of the Cash Flow Statement and related notes.

 

The company proposes to continue to adopt FRS102 in its next financial statements.

 

 

1.2

Going concern

 

The Company is reliant on the operations of its fellow subsidiary NewHospitals (St Helens and Knowsley) Limited to be able to meet its liabilities as they fall due.  Taking into account reasonable possible risks in operations to NewHospitals (St Helens and Knowsley) Limited and the fact that the obligations of NewHospitals (St Helens and Knowsley) Limited's sole customer are underwritten by the Secretary of State for Health, the directors have a reasonable expectation that the Company will be able to settle its liabilities as they fall due for the foreseeable future and therefore it is appropriate to prepare these financial statements on the going concern basis.

 


1

Accounting policies (continued)

 

1.3

Financial instruments

 

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 instruments are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument.

 

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

 

Trade and other debtors / creditors

 

Trade and other debtors are recognised initially at transaction price less attributable transaction costs receivable within one year. Trade and other creditors are recognised initially at transaction price plus attributable transaction costs payable within one year. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses in the case of trade debtors.  If the arrangement constitutes a financing transaction, for example if payment is deferred beyond normal business terms, then it is measured at the present value of future payments discounted at a market rate of instrument for a similar debt instrument.

 

Interest-bearing borrowings classified as basic financial instruments

 

Senior secured bonds and term loans are initially stated at the amount of the net proceeds after deduction of related issue costs.  The carrying amount is increased by the finance cost in respect of the accounting period and reduced by payments made in that period.  The index-linked secured bonds and index-linked secured term loan are each valued at amortised cost, using the effective interest rate method, taking account of projected indexation across the term of the liability.

 

Issue costs are written off to the profit and loss account, over the term of the debt on an amortised cost basis.

 

 

2

Auditor's remuneration

 

 

2016

2015

 

Fees payable to the company's auditor and its associates:

£000

£000

 

 

For audit services

 

 

Audit of the company's financial statements

5

5

 

 

 

 

 

 

 

The auditor's remuneration was borne by NewHospitals (St Helens & Knowsley) Limited.

 

Amounts receivable by the Company's auditor and its associates in respect of services to the Company, other than the audit of the Company's financial statements, have not disclosed as the information is required instead to be disclosed on a consolidated basis in the consolidated financial statements of the Company's parent, NewHospitals (St Helens & Knowsley) Holdings Limited.

 

 


3

Employees

 

 

The Company operates through subcontracting services and there were no persons employed by the Company during the year (2015: none).

 

 

4

Interest receivable and similar income

 

 

2016

2015

 

£000

£000

 

Interest income

 

 

Interest on loans to NewHospitals (St Helens & Knowsley) Limited

16,214

18,621

 

 

 

 

 

5

Interest payable and similar charges

 

 

2016

2015

 

£000

£000

 

Interest on financial liabilities measured at amortised cost:

 

 

Interest and indexation on bank overdrafts and loans

4,763

7,499

 

Interest and indexation on bonds

5,106

7,965

 

Interest on subordinated loans

5,662

2,468

 

Amortisation of finance arrangement costs

683

689

 

 

 

 

 

 

16,214

18,621

 

 

 

 

 

6

Taxation

 

 

The results for the year do not give rise to a tax charge (2015: £nil).

 

 

7

Financial instruments

 

 

2016

2015

 

£000

£000

 

Carrying amount of financial assets

 

 

Debt instruments measured at amortised cost

360,420

369,707

 

 

 

 

 

 

Carrying amount of financial liabilities

 

 

Measured at amortised cost

360,370

369,657

 

 

 

 


7

Financial instruments (continued)

 

 

 

The Company's financial instruments comprise index-linked bonds, an index-linked bank loan, a fixed rate subordinated loan, and, a fixed rate intercompany debtor and an index-linked intercompany debtor, both due from NewHospitals (St Helens and Knowsley) Limited. NewHospitals (St Helens and Knowsley) Limited services these loans with cash flows generated under the Project Agreement.

 

The financial structure has been established to ensure that the cash flows from NewHospitals (St Helens and Knowsley) Limited's PFI hospital concession assets are sufficient to meet all interest and principal payments due on the index-linked and fixed rate debt. During the year, NewHospitals (St Helens and Knowsley) Limited met its debt service obligations to the Company. Based upon the projected future cash flows of NewHospitals (St Helens and Knowsley) Limited, the directors consider that it will be able to meet its obligations to the Company as they fall due for the foreseeable future.

 

The Company does not undertake financial instrument transactions which are speculative or unrelated to the Company's trading activities. Board approval is required for the use of any new financial instrument, and the Company's ability to enter into any new transaction is constrained by covenants in its existing funding agreements. Exposure to market related interest rate risk, cash flow risk, credit risk, and liquidity risk arises in the normal course of the Company's business. The Company's exposure to, and the management of, these risks is described in further detail as follows:

 

Market related interest rate risk

The Company is exposed to market related interest rate risk in relation to its index-linked debt through movements in the UK RPI. This is mitigated as the onloans due from NewHospitals (St Helens and Knowsley) Limited are also index-linked through movements in the UK RPI. NewHospitals (St Helens and Knowsley) Limited can service these onloans as the majority of the cash flows generated from its PFI hospital concession assets increase in line with movements in the UK RPI.

 

Interest rate risk profile of financial assets and liabilities

The disclosures below set out the carrying amount, by maturity, of the Company's floating interest rate financial instruments that are exposed to interest rate risk.

 

 

 

 

Floating Rate:

 

 

 

Bond

Bank loan

Loan to NewHospitals (St Helens & Knowsley) Limited

Bond

Bank loan

Loans to NewHospitals (St Helens & Knowsley) Limited

 

 

2016

2016

2016

2015

2015

2015

 

 

£'000

£'000

£'000

£'000

£'000

£'000

 

 

Within 1 year

(5,602)

(6,208)

11,810

(5,552)

(6,219)

11,771

 

 

1-2 years

(5,418)

(7,888)

13,306

(5,751)

(6,374)

12,125

 

 

2-3 years

(4,159)

(8,225)

12,384

(4,704)

(6,534)

11,238

 

 

3-4 years

(2,809)

(8,576)

11,385

(3,611)

(6,697)

10,308

 

 

4-5 years

(2,877)

(8,943)

11,820

(2,439)

(6,864)

9,303

 

 

Over 5 years

(221,350)

(187,687)

409,037

(162,451)

(141,695)

304,146

 

 

Unamortised transaction costs

8,426

5,345

(13,771)

8,717

5,715

(14,432)

 

 

 

 

 

 

 

 

 








 

 

Total

(233,789)

(222,182)

455,971

(175,791)

(168,668)

344,459

 

 

 

 

 

 

 

 

 


7

Financial instruments (continued)

 

 

 

Floating rate

The floating rate financial liabilities comprise a 1.7774% Index-linked Guaranteed Secured Bond and a 1.743% Index-Linked Guaranteed Secured European Investment Bank Loan. The floating rate financial asset comprises an amount due from NewHospitals (St Helens and Knowsley) Limited. The return on the amount due from NewHospitals (St Helens and Knowsley) Limited exactly matches the interest and indexation payable on the Company's bond and bank loan. Interest on financial instruments classified as floating rate is repriced at intervals of less than one year. The disclosures below set out the carrying amount, by maturity, of the Company's fixed interest rate financial instruments.

 

 

 

 

Fixed Rate:

 

 

 

Subordinated Loan Stock

Loan to NewHospitals (St Helens & Knowsley) Limited

Total

Subordinated Loan Stock

Loan to NewHospitals (St Helens & Knowsley) Limited

Total

 

2016

2016

2016

2015

2015

2015

 

£'000

£'000

£'000

£'000

£'000

£'000

 

 

Over 5 years

(20,914)

20,914

-

(22,490)

22,490

-

 

Unamortised transaction costs

717

(717)

-

741

(741)

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,197)

20,197

-

(21,749)

21,749

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed rate

The fixed rate financial liability comprises an 11.96% unsecured subordinated loan. The fixed rate financial asset comprises an amount due from NewHospitals (St Helens and Knowsley) Limited. The return on the amount due from NewHospitals (St Helens and Knowsley) Limited exactly matches the interest payable on the Company's subordinated loan stock. Interest on financial instruments classified as fixed rate is fixed until the maturity of the instrument. The Company also has an amount due from NewHospitals (St Helens and Knowsley) Limited of £50,000 which is not included in the above table as it is non-interest bearing and not subject to interest rate risk.

 

A sensitivity analysis showing the effects of reasonably possible changes in the UK RPI on the Company's results is not disclosed as the financing costs of the bond and bank loan are matched exactly by the return on the amount due from NewHospitals (St Helens and Knowsley) Limited, whatever the prevailing rate of the UK RPI. Therefore the Company's results are unaffected by any changes in the UK RPI

 

 


7

Financial instruments (continued)

 

 

 

Cash flow risk

The Company is exposed to cash flow risk in relation to variability in long term cash inflows due under the onloan agreements with NewHospitals (St Helens and Knowsley) Limited. This is mitigated as the cash inflows due under the onloan agreements with NewHospitals (St Helens and Knowsley) Limited exactly match the cash outflows required to service the Company's financial liabilities. NewHospitals (St Helens and Knowsley) Limited's exposure to variability in long term cash inflows generated under the concession with the Trust is mitigated as performance and availability deductions are passed on to the relevant service providers and the majority of revenues and costs which the Company receives and pays are index-linked to movements in the UK RPI.

 

Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge an obligation under the contract giving rise to the financial instrument. The Company's credit risk is concentrated as its cash inflows due under the onloan agreements are received from NewHospitals (St Helens and Knowsley) Limited. This concentration of risk is mitigated as the cash flows generated from the PFI hospital concession assets held by NewHospitals (St Helens and Knowsley) Limited are secured under contract with the Trust, whose obligations and liabilities under the Project Agreement are effectively underwritten by the UK Government.

 

Maximum exposure to credit risk

The maximum credit risk exposure relating to financial assets is represented by their carrying value at the balance sheet date.

The Company's risk management policies and contractual protections in place for monitoring and preserving the credit quality of the financial assets detailed above are disclosed in the directors' report and in this note 7 to the financial statements. None of the financial assets are past due or subject to any impairment as at the balance sheet date.

 

Liquidity risk

The Company's liquidity risk is principally managed through financing the Company by means of long term borrowings which are tailored to match the expected cash inflows due under the onloan agreements from NewHospitals (St Helens and Knowsley) Limited. NewHospitals (St Helens and Knowsley) Limited's liquidity risk is principally managed through financing by means of the onloan agreements which are tailored to match the expected cash flows arising from its PFI hospital concession assets. In addition NewHospitals (St Helens and Knowsley) Limited maintains a debt service reserve bank account to provide short term liquidity against future debt service requirements under the onloan agreements.  The maturity profile of the anticipated undiscounted future cash flows including interest and inflation and based on the earliest date on which the Company can be required to pay its financial liabilities, is as follows:

 

 

 

 

Bond*

Bank loan*

Subordinated Loan Stock

Bond*

Bank loan*

Subordinated Loan Stock

 

 

Interest rate

4.28%

4.24%

11.96%

4.28%

4.24%

11.96%

 

2016

2016

2016

2015

2015

2015

 

£'000

£'000

£'000

£'000

£'000

£'000

 

 

Within 1 year

8,916

9,462

3,939

8,867

9,368

3,660

 

1-2 years

7,870

9,697

4,500

9,047

9,601

3,540

 

2-3 years

6,792

9,938

5,255

7,985

9,840

3,421

 

3-4 years

5,659

10,185

4,375

6,892

10,084

3,301

 

4-5 years

5,753

10,438

3,254

5,742

10,335

3,182

 

Over 5 years

371,622

225,565

69,602

382,920

239,470

36,308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

406,612

275,285

90,925

421,453

288,698

53,412

 

 

 

 

 

 

 

 

 

 

 

 

 


7

Financial instruments (continued)

 

 

 

*After 6 months following each period end date, this assumes a long run average of the future UK RPI of

 

 

2.5% per annum. This long term assumed rate, taken together with the fixed interest rate elements of the

 

 

bond and bank loan as detailed in note 9, gives the assumed long term combined interest rate as

 

 

disclosed above.

 

 

 

Set out below is a comparison of carrying amounts and fair values of all the Company's financial assets and liabilities.

 

 

2016

2016

2015

2015

 

 

Book value

Fair value

Book value

Fair value

 

 

 

Bank loan

(164,561)

(227,527)

(168,667)

(231,768)

 

Bond

(172,449)

(242,215)

(175,792)

(245,226)

 

Subordinated loan stock

(23,361)

(54,856)

(25,198)

(35,049)

 

Loans to NewHospitals (St Helens & Knowsley) Limited

360,371

524,598

369,657

512,043

 

 

 

 

 

 

 

 

 

 

 

 

8

Debtors

 

 

2016

2015

 

 

Amounts falling due within one year:

 

£000

£000

 

 

 

Loans to NewHospitals (St Helens & Knowsley) Limited

12,500

11,771

 

 

 

 

 

 

 

 

 

Amounts falling due after one year:

 

 

 

Loans to NewHospitals (St Helens & Knowsley) Limited

347,920

357,936

 

 

 

 

 

 

 

 

 

Total debtors

 

360,420

369,707

 

 

 

 

 

 

 


9

Loans and borrowings

 

 

2016

2015

 

£000

£000

 

 

Bank loans

164,561

168,668

 

Bonds

172,449

175,791

 

Subordinated loans

20,197

21,750

 

 

 

 

 

 

 

357,207

366,209

 

 

 

 

 

 

 

Payable within one year

12,500

11,771

 

Payable after one year

344,707

354,438

 

 

 

 

 

 

 

Terms and debt repayment schedule:

 

 

 

Nominal interest rate

Year of maturity

Repayment schedule

2016

£000

2015

£000

 

Bond                                     1.7774%  

2047

Semi-annual

172,449

175,791

 

Bank loan

1.7430%

2038

Semi-annual

164,561

168,668

 

Subordinated loan stock

11.96%

2047

Semi-annual

20,197

21,750

 

 

 

 

 

 

 

357,207

366,209

 

 

 

 

 


9

Loans and borrowings (continued)

 

 

 

Index-Linked Guaranteed Secured Bonds due 2047

 

The Company has created £178,300,000 of 1.7774% Index-Linked Guaranteed Secured Bonds due 2047 pursuant to a Bond Trust Deed and Collateral Deed dated 7 June 2006, of which £153,000,000 were issued for cash on 7 June 2006 at 99.99% of par.

 

On 20 March 2008, £6,800,000 of the remaining £25,300,000 Index-Linked Guaranteed Secured Bonds created but not issued, the "Committed Variation Bonds", were cancelled as they expired on 31 December 2007 in accordance with the Terms of the Bond Trust Deed and Collateral Deed.

 

The bonds bear interest at 1.7774%, which together with its principal repayment, is subject to indexation based on movements in the UK RPI in accordance with the terms of the Bond Trust Deed. The interest is payable semi-annually in arrears on 31 March and 30 September each year.  The principal on the bonds is repayable in instalments which commence on 31 March 2012 and end in February 2047.

 

The bonds have the benefit of an unconditional and irrevocable financial guarantee issued by Assured Guaranty (Europe) Limited (formerly Financial Security Assurance (UK) Limited) in favour of Deutsche Trustee Company Limited as security trustee over all of the undertakings and assets of the Company.

 

Index-Linked Guaranteed Secured Bank Loan due 2038

 

The Company has drawn £149,186,000 of a 1.743% Index-Linked Guaranteed Secured Bank Loan due 2038 pursuant to a Loan Agreement dated 1 June 2006 and a Collateral Deed dated 7 June 2006.

 

The loan has an interest rate of 1.743%, which together with its principal repayment, is subject to indexation based on movements in the UK RPI in accordance with the terms of the Loan Agreement. The interest is payable semi-annually in arrears on 31 March and 30 September each year.  The loan principal is repayable in instalments which commence on 30 September 2011 and end in June 2038.

 

The index linked bank loan has the benefit of an unconditional and irrevocable financial guarantee issued by Assured Guaranty (Europe) Limited (formerly Financial Security Assurance (UK) Limited) in favour of Deutsche Trustee Company Limited as security trustee over all of the undertakings and assets of the Company.

 

 

 

 


9

Loans and borrowings (continued)

 

 

 

Fixed rate unsecured subordinated loan stock due 2047

 

On 24 May 2006, the Company authorised and approved the issue of £30,090,000 unsecured 11.96% fixed interest loan notes which were constituted in a Deed Poll dated 7 June 2006. Under the terms of an Equity Subscription Agreement dated 7 June 2006, the Company's shareholders undertook to subscribe for the loan notes in separate tranches up to a total value of £30,090,000 over the period from 31 May 2009 to 31 March 2011. In the year ended 31 March 2011 the total amount of loan notes subscribed for by the Company's shareholders was £29,490,000. On the 30 March 2012 an early redemption payment of £5,000,000 (at par) was made to the Company's shareholders and during the year to 31 March 2016 two further redemptions of principal have been paid to the Company's shareholders, leaving the balance of subordinated loan stock as at the year-end of £20,914,000. The 11.96% fixed interest accrues from 1 April 2011 and interest is paid semi-annually in arrears every 30 September and 31 March thereafter. Of the total £30,090,000 loan notes constituted, £600,000 relates to a commitment to subscribe for Contingent Equity Tranche loan notes as detailed in the Equity Subscription Agreement. The commitment to subscribe for this tranche of the loan notes is no longer required as the matching Committed Variation Bonds to which the amount relates were cancelled on 20 March 2008, as they expired on 31 December 2007, in accordance with the Terms of the Bond Trust Deed and Collateral Deed.

 

Under the terms of an Intra group Loan Agreement entered into on 7 June 2006, NewHospitals (St Helens and Knowsley) Finance plc undertook to onward loan the proceeds of the issue of the subordinated loan stock to NewHospitals (St Helens and Knowsley) Limited, on exactly the same payment terms for interest and principal.

 

The proceeds of the loan stock issue are being used by the Group to finance its obligations under its Project Agreement with the Trust.

 

The loan notes are redeemable at any time in line with the provisions of Clause 3 of the Deed Poll Constituting Unsecured Subordinated Loan Notes for the Company and in accordance with condition 3 (Redemption) of the aforementioned Deed.

 

 

 

10

Creditors: amounts falling due after more than one year

 

 

2016

2015

 

£000

£000

 

 

Accruals

 

3,163

3,448

 

 

 

 

 

 

11

Share capital

 

 

2016

2015

 

£000

£000

 

Equity

 

 

Allotted, called up and fully paid

 

 

50,000 ordinary shares of £1 each

50

50

 

 

 

 

 


12

Controlling party

 

 

At 31 March 2016, the Company's immediate parent undertaking is NewHospitals (St Helens and Knowsley) Holdings Limited. NewHospitals (St Helens and Knowsley) Holdings Limited was owned 74.4% by Innisfree PFI Secondary Fund 2 LP and 25.6% by Innisfree PFI Secondary Fund. Both entities are registered in England and Wales.

 

The largest and smallest group in which the results of the Company are consolidated is NewHospitals (St Helens and Knowsley) Holdings Limited, a Company registered and incorporated in England and Wales.  The consolidated financial statements of the Group are available to the public and may be obtained from 8 White Oak Square, London Road, Swanley, Kent, BR8 7AG, United Kingdom.

 

In the directors' opinion, the Company's ultimate parent undertaking and controlling party is Innisfree PFI Secondary Fund 2 LP a limited partnership registered in England and Wales.

 

 

 


This information is provided by RNS
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