Mr G Newby Ms S Exell
Mr M Wayment Mr A Campbell
Kent BR8 7AG
United Kingdom EH3 7PE
Strategic report 1 - 4
Directors' report 5 - 6
Directors' responsibilities statement 7
Independent auditor's report to the members of Annes Gate Property PLC 8 - 14
Profit and loss account 15
Balance sheet 16
Statement of changes in equity 17
Statement of cash flows 18
Notes to the financial statements 19 - 31
FOR THE YEAR ENDED 31 DECEMBER 2022
The directors present the strategic report for the year ended 31 December 2022.
The principal activity of the Company is the finance, design and construction, refurbishment and operation of a building at 2 Marsham Street, London for Her Majesty's Principal Secretary of State for the Home Department under the Government's Private Finance Initiative ('PFI'). On 8 March 2022, the contract was novated to The Secretary of State for Levelling Up, Housing and Communities (acting through the Government Property Agency) ("MLUHC"), (the "Authority"). The directors are not aware, at the date of this report, of any likely major changes in the Company's activities in the next financial year.
The Authority is the sole client of the company but the directors consider that no strategic risk arises from such a small client base since the client is a central government organisation and its obligations under the Project Agreement are underwritten by MLUHC.
Performance and lifecycle risks under the Project Agreement and related contracts is passed on to the services provider or the building contractor. The obligations of these subcontractors are underwritten either by performance guarantees issued by banks or by parent company guarantees.
The Company is exposed to financial risk through its financial assets and liabilities. The key financial risk is that the proceeds from financial assets are not sufficient to fund the obligations arising from liabilities as they fall due. The most important components of financial risk are credit risk and liquidity risk. Refer to note 10 for further details.
The Company has considered whether it is exposed to additional risks as a result of climate change and has not identified any risks that would significantly impact the Company. This is primarily due to the nature of the operations of the project, where the majority of work is performed by sub-contractors who are responsible for the associated risks. Whilst, the company is subject to SPV costs through the provision and maintenance of facilities including, for instance, heating systems, the company’s contractual protections are expected to protect the company from changes in law that result in any longer term pricing risk associated with climate change.
As described above, the Company has entered into a project agreement with the Authority, together with an associated construction contract, funding agreements, hard and soft services contracts and ancillary project agreements ('the Project Agreement'). The Project Agreement requires it to finance, design, develop, construct, maintain and deliver certain non-core services within the new 2 Marsham Street, London building for a primary term of twenty-nine years commencing 26 March 2002, the date of signing of the Project Agreement, to 2 April 2031.
As reported in the Company's profit and loss account, revenue has increased from £28,946,000 in 2021 to
£34,816,000 in 2022, due to increased pass through costs in respect of variations that are recharged with no mark- up as well as increased services revenue as a result of increased services costs. Cost of sales has increased from
£19,332,000 in 2021 to £24,216,000 in 2022.
Interest receivable and similar income has reduced slightly to £12,840,000 (2021: £13,106,000) mainly due to reduced interest received on the finance debtor as a consequence of finance debtor repayments being made throughout the year.
Interest payable and similar expenses has increased to £15,947,000 (2021: £15,184,000), as a result of higher RPI on indexed bonds.
The finance debtor is being amortised over the life of the concession and the carrying value at the reporting date was £208,518,000 (2021: £214,980,000). The finance debtor amortisation during the year was £6,462,000 (2021:
£6,086,000).
During the year, the company has repaid £10,021,000 (2021: £10,867,000) of the Secured Guaranteed Bonds. Scheduled loan repayment dates are 31 March and 30 September each year.
During the year the company has not repaid any of the subordinated unsecured loan stock as scheduled repayments do not commence until 2031 (2021: £nil).
The profit for the year after taxation was £5,323,000 (2021: £3,073,000). The directors consider the results for the year satisfactory.
The balance sheet shows that the carrying value of the Company's net assets at year end was £22,205,000 (2021:
£21,175,000).
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.
Performance deductions under the service contract
Financial penalties are levied by the Authority in the event of performance standards not being achieved according to detailed criteria set out in the Project Agreement. The deductions are passed on to the service provider. In the year ended 31 December 2022, deductions of £8,800 (2021: £14,600) had been levied which represents 0.03% (2021: 0.05%) of revenue. The level of deductions is considered very low and the Directors consider the performance for the year to be satisfactory.
Financial performance
The directors have modelled the anticipated financial outcome of the Project across its full term. The directors monitor actual financial performance against anticipated performance. As at 31 December 2022, the Company's performance against this measure was satisfactory.
The Company is in the operational phase of the contract. In the opinion of the directors the Project is proceeding satisfactorily to the standards of the contract.
The Company will continue to provide and support the Authority in its development of the building at 2 Marsham Street, London under the PFI scheme.
The Directors have prepared cash flow forecasts which indicate that, taking account of severe but plausible downsides, the Company will have sufficient funds to meet its liabilities as they fall due. Further information of the Directors' assessment is contained within note 1.2.
The Company was able to meet the financial covenants as at 31 December 2021 and 31 December 2022, and is forecast to meet them for the foreseeable future, for at least 12 months from the date of signing the accounts.
Taking into account reasonable possible risks in operations to the Company, the fact the obligations of the Company's sole customer are underwritten by MLUHC, the Directors have a reasonable expectation that the Company will be able to settle its liabilities as they fall due to the foreseeable future. It is therefore appropriate to prepare these financial statements on the going concern basis.
The Directors have a duty to promote the success of the Company for the benefit of the shareholders as a whole and to describe how this duty has been performed with regard to those matters set out in section 172 of the Companies act 2006 (“section 172”).
The Directors have identified the Company’s main stakeholders as the following:
The Company’s shareholders, bondholders and credit provider
Principal considerations of the board are whether the investment objective of the Company is meeting shareholder and bondholder expectations and the how the manager implements the objective. These are discussed at all board meetings, which are held regularly throughout the year. The board also attends regular shareholder and bondholder briefing meetings to ensure that shareholder and bondholder engagement is optimized.
The manager
The delivery by the manager of its services is fundamental to the long term success of the Company. The board seeks to engage regularly with the manager through a number of forums, including at board meetings, portfolio briefings and through engagement with the manager’s senior leadership team. Regular reporting is provided to the board by the manager, which will alert the board to changes to regulation or market practice, which will inform the board’s decision making.
Throughout the year the board has made due consideration during its discussions and decision-making of the matters set out in section 172 and below is a description of how the directors have had regards to these matters when performing their duties:
The likely consequences of any decision in the long term
The Company has outsourced the management of the Company to Vercity Management Services Limited (“Vercity”), the manager. The delivery by the manager of its services is fundamental to the long term success of the Company. The board seeks to engage regularly with the manager through a number of forums, including at board meetings, portfolio briefings and through engagement with the manager’s senior leadership team. Regular reporting is provided to the board by the manager, which will alert the board to changes to regulation or market practice, which will inform the board’s decision making.
The interests of the Company’s employees
As an externally managed Company, the Company’s activities are all outsourced and therefore it does not have any employees. The Company does however, pay due regard to the interests and safety of all those engaged by contractors to the Company to perform services on its behalf.
The need to foster the Company’s business relationships with suppliers, customers and others
The Company is committed to upholding the underlying principle of PFI of working in partnerships with all parties to the arrangement. As noted above, the Company has policies and procedures to ensure regular communication is maintained between the parties.
The impact of the Company’s operations on the community and the environment
The Company has very limited direct impact on the environment as it has no greenhouse gas emissions. Notwithstanding that the Company is committed to minimizing environmental disruption from its activities. The board upholds the Company’s environmental policy in all its activities and requires all parties to the arrangement to do the same.
The desirability of the Company maintaining a reputation for high standards of business conduct
The Company is committed, in its day to day operations and dealings with all affiliates to uphold the highest standard of business conduct and integrity. The directors are not responsible for setting a “business culture” in the traditional sense, but are committed to understanding the culture of the manager and service providers and raise any concerns in this regard if necessary.
The need to act fairly between members of the Company
The members of the Company are represented at board meetings by their appointed director(s). Conflicts on matters to be discussed are identified at each meeting of the board. Directors representing a member with a conflict of interest may therefore be excluded from any discussion or vote in regards to it.
The Directors are cognisant of their duty under s172 in their deliberation as a board on all matters. Decisions made by the board take into account the interests of all the Company’s key stakeholders and reflect the board’s belief that the long term sustainable success of the Company is linked directly to its key stakeholders.
..............................
Ms S Exell
On behalf of the board
Date: .2...3../.6.../.2...3...............................
FOR THE YEAR ENDED 31 DECEMBER 2022
The directors present their annual report and financial statements for the year ended 31 December 2022.
Principal activity, key performance indicators, financial performance and principal risks and uncertainties during the year are mentioned in the Strategic Report.
Annes Gate Property Plc paid dividends to AGP Holdings (1) Ltd of £4,293,000 (2021: £5,371,000). The directors do not recommend payment of a final dividend.
After the year end, the directors have proposed interim dividends of £1,718,000. This has not been included within creditors as it was not approved before the year end.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Mr D Carr Mr G Newby Ms S Exell
Mr M Wayment
Mr A Campbell (Appointed 21 February 2022)
The Articles of Association of the Company provide that in certain circumstances the directors are entitled to be indemnified out of the assets of the Company against claims from third parties in respect of certain liabilities arising in connection with the performance of their functions, in accordance with the provisions of the UK Companies Act 2006. Indemnity provisions of this nature have been in place during the financial year but have not been utilised by the directors.
The Company's principal financial instruments comprise of the finance debtor, short term bank deposits, subordinated debt, index-linked and fixed rate bonds. The main purpose of these financial instruments is to ensure, via the terms of the financial instruments, that the profile of the debt service costs is tailored to match expected revenues arising from the Project Agreement.
The Company does not undertake financial instrument transactions which are speculative or unrelated to the Company's trading activities. Board approval is required for the use of any new financial instrument and the Company's ability to do so is restricted by covenants in its existing funding agreements.
Exposure to liquidity, credit and interest rate risks arise in the normal course of the Company's business. Further details relating to these risks are given in note 10 to the financial statements.
In accordance with Section 489 of the Companies Act 2006, a resolution for the appointment of Johnston Carmichael LLP as auditor of the company is to be proposed at the forthcoming Annual General Meeting.
FOR THE YEAR ENDED 31 DECEMBER 2022
The directors who held office at the date of approval of this Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditor is unaware; and each director has taken all the steps that he/she ought to have taken as a director to make himself/herself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
The directors confirm that:
the financial statements, prepared in accordance with UK Generally Accepted Accounting Practice, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company; and
the strategic report includes a fair review of the development and performance of the business and the position of the company, together with a description of the principal risks and uncertainties that they face.
The Company has outsourced the financial reporting function to Vercity Management Services Limited (“Vercity”). Authorities remain vested in the board members of the Company. Vercity reports regularly to the board of the Company. The board receives monthly reports from Vercity which specifically summarise and address the financial, contractual and commercial risks that the Company is exposed to, and are pertinent to the industry in which the Company operates. The board also receives monthly management accounts with explanations of variances from annual budgets and forecasts, which are in turn compared to the Financial Model, which represents the long term business plan of the company and outlines its ability to comply with its debt obligations and covenants. Material deviations from the business plan are investigated and reported on. Supporting this process, Vercity evaluates its performance under the framework of an Internal Audit and Assessment programme which sits within its own Corporate Governance framework. This process ensures that the project remains robust and viable throughout the life of the contract.
On behalf of the board
..............................
Ms S Exell
Date: .2...3../.6.../.2...3...............................
FOR THE YEAR ENDED 31 DECEMBER 2022
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 elected to prepare the financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice), including FRS102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
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 the financial statements comply with the Companies Act 2006. They are also responsible for such internal control as they determine 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.
We have audited the financial statements of Annes Gate Property Plc (“the Company”), for the year ended 31 December 2022, which comprise the Profit and Loss Account, Balance Sheet, Statement of Changes in Equity, Statement of Cash Flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
Give a true and fair view of the state of the Company's affairs as at 31 December 2022 and of its profit for the year then ended;
Have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
Have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We planned our audit by first obtaining an understanding of the Company and its environment, including its key activities delegated by the Board to relevant approved third-party service providers and the controls over provision of those services.
We conducted our audit using information maintained and provided by Vercity Social Infrastructure (UK) Limited (the “Management Service Provider”) to whom the Company has delegated the provision of services.
We tailored the scope of our audit to reflect our risk assessment, taking into account such factors as the project’s financial model and the nature of the activities within the Company, the involvement of the Management Service Provider, accounting processes and controls, and the industry in which the Company operates.
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in the evaluation of the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included 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. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, we do not provide a separate opinion on these matters.
We summarise below the key audit matters in arriving at our audit opinion above, together with how our audit addressed these matters and the results of our audit work in relation to these matters.
Key audit matter | How our audit addressed the key audit matter and our conclusions |
Risk of incorrect recognition of revenue The company generated services revenue (notes 1.3 and 3 to the financial statements) of £29.8m (2021: £27.3m) which arises from a service concession arrangement to design, construct, finance, refurbish and operate a building at 2 Marsham Street, London for His Majesty’s Principal Secretary of State for the Home Department. Accounting for the service concession contract (note 1.6 to the financial statements) requires the exercise of judgement resulting from allocation of the unitary charge between finance debtor interest, finance debtor amortisation and service margin. Given the level of estimation and judgement required, we consider this to be one of the most significant assessed risks of material misstatement due to error. | Central to our audit response was obtaining audit evidence and evaluating management’s estimate and allocation of revenue recognised. Our audit response included:
|
The procedures outlined above did not identify any material misstatements in the recognition of revenue. |
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature and extent of our work and in evaluating the results of that work.
Materiality measure | Value |
Materiality for the financial statements as a whole – we have set materiality as 0.7% of gross assets (PY: 0.7%) as we believe that gross assets is the primary performance measure used by shareholders and is the key driver of the ability to service the debt of the Company. We determined the measurement percentage to be commensurate with the risk and complexity of the audit and the Company’s listed status. | £1,698,400 (2021: £1,641,000) |
Performance materiality – performance materiality represents amounts set by the auditor at less than materiality for the financial statements as a whole, to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. | £1,273,800 (2021: £820,000) |
In setting this we consider the Company’s overall control environment, our past experience of the audit that indicates a lower risk of material misstatements. Based on our judgement of these factors, we have set performance materiality at 75% (PY: 50%) of our overall financial statement materiality. The threshold has increased from prior year due to this being our second year as auditors and our re-evaluation based on our experience as the Company’s auditors. | |
Specific materiality – recognising that there are transactions and balances of a | £10,000 |
lesser amount which could influence the understanding of users of the financial | |
statements we calculate a lower level of materiality for testing such areas. | (2021: £10,000) |
We have set a specific materiality of £10,000 in respect of related party | |
transactions. | |
We used our judgement in setting these thresholds and considered our past | |
experience of the audit, the history of misstatements and industry benchmarks for | |
specific materiality. | |
Communication of misstatements to the directors – we agreed with the Directors that we would report to them all differences in excess of 5% (PY: 5%) of overall materiality in addition to other identified misstatements that warranted reporting on qualitative grounds, in our view. For example, an immaterial misstatement as a result of fraud. | £84,900 (2021: £82,000) |
During the course of the audit, we reassessed initial materiality and found no reason to alter the basis of calculation used at year-end.
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Company’s ability to continue to adopt the going concern basis of accounting included:
Evaluating the Director’s method of assessing going concern, including consideration of market conditions;
Assessing and challenging the forecast cashflows and associated sensitivity modelling used by the Directors in support of their going concern assessment;
Evaluating and challenging the ability to meet current and future lending covenants; and
Assessing the adequacy of the Company’s going concern disclosures included in the Annual Report.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
The other information comprises the information included in the Annual Report other than the financial statements and our auditor’s report thereon. The Directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
In our opinion, based on the work undertaken in the course of the audit:
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; and
The Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us 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
As explained more fully in the Directors’ responsibilities statement set out on page 7, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for 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 the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
We assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations by considering their experience, past performance and support available.
All engagement team members were briefed on relevant identified laws and regulations and potential fraud risks at the planning stage of the audit. Engagement team members were reminded to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
We obtained an understanding of the legal and regulatory frameworks that are applicable to the Company and the sector in which it operates, focusing on those provisions that had a direct effect on the determination of material amounts and disclosures in the financial statements. The most relevant frameworks we identified include:
United Kingdom Generally Accepted Accounting Practice, including FRS 102;
Listing rules continuing obligations (Chapter 17);
Financial Conduct Authority (FCA) rules; and
UK Companies Act 2006.
We gained an understanding of how the Company is complying with these laws and regulations by making enquiries of management and those charged with governance. We corroborated these enquiries through our review of relevant correspondence with regulatory bodies and board meeting minutes.
We assessed the susceptibility of the Company’s financial statements to material misstatement, including how fraud might occur, by meeting with management and those charged with governance to understand where it was considered there was susceptibility to fraud. This evaluation also considered how management and those charged with governance were remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control environment and how management and those charged with governance oversee the implementation and operation of controls.
We identified a heightened fraud risk in relation to revenue recognition (audit procedures performed in response to this risk are set out in the section on key audit matters above) and management override of controls (procedures in response to this risk are included below).
In addition to the above, the following procedures were performed to provide reasonable assurance that the financial statements were free of material fraud or error:
Completion of appropriate checklists and use of our experience to assess the Company’s compliance with the Companies Act 2006 and the Listing Rules;
Reviewing minutes of meetings of those charged with governance for reference to: breaches of laws and regulation or for any indication of any potential litigation and claims; and events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud;
Reviewing the level of and reasoning behind the Company’s procurement of legal and professional services;
Performing audit work procedures over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing judgements made by management in their calculation of accounting estimates for potential management bias; and
Agreement of the financial statement disclosures to supporting documentation.
Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve intentional concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it.
Following the recommendation of the Audit Committee, we were appointed by the Board on 6 January 2022 to audit the financial statements for the year ended 31 December 2021 and subsequent financial periods. The period of our total uninterrupted engagement is two years, covering the years ended 31 December 2021 to 31 December 2022.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Company and we remain independent of the Company in conducting our audit.
Our audit opinion is consistent with the additional report to the Audit Committee.
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.
7-11 Melville Street Edinburgh
United Kingdom EH3 7PE
26 June 2023
Date: .........................
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER | 2022 | ||
2022 | 2021 | ||
Notes | £000 | £000 | |
Turnover | 3 | 34,816 | 28,946 |
Cost of sales | (24,216) | (19,332) | |
Gross profit | 10,600 | 9,614 | |
Administrative expenses | (1,042) | (1,140) | |
Operating profit | 9,558 | 8,474 | |
Interest receivable and similar income | 6 | 12,840 | 13,106 |
Interest payable and similar expenses | 7 | (15,947) | (15,184) |
Profit before taxation | 6,451 | 6,396 | |
Tax on profit | 8 | (1,128) | (3,323) |
Profit for the financial year | 5,323 | 3,073 | |
All recognised gains and losses are shown in the Profit and Loss account above. Therefore, a statement of other comprehensive income has not been prepared.
The notes on pages 19 to 31 form an integral part of these financial statements.
BALANCE SHEET AS AT 31 DECEMBER 2022 | |||||
2022 | 2021 | ||||
Notes | £000 | £000 | £000 | £000 | |
Current assets | |||||
Debtors falling due after more than one year | 11 | 201,658 | 208,518 | ||
Debtors falling due within one year | 11 | 27,150 | 10,642 | ||
Cash at bank and in hand | 9,568 | 24,910 | |||
238,376 | 244,070 | ||||
Creditors: amounts falling due within one year | 12 | (11,727) | (15,756) | ||
Net current assets | 226,649 | 228,314 | |||
Creditors: amounts falling due after more than one year | 13 | (196,308) | (198,348) | ||
Provisions for liabilities | |||||
Deferred tax liability | 15 | 8,136 | 8,791 | ||
(8,136) | (8,791) | ||||
Net assets | 22,205 | 21,175 | |||
Capital and reserves | |||||
Called up share capital | 16 | 550 | 550 | ||
Profit and loss reserves | 21,655 | 20,625 | |||
Total shareholders' funds | 22,205 | 21,175 | |||
The notes on pages 19 to 31 form an integral part of these financial statements.
The financial statements were approved by the board of directors and authorised for issue on .....2...3../..6../.2...3 and
are signed on its behalf by:
..............................
Ms S Exell
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2022 | ||||
Share capital | Profit and loss reserves | Total | ||
Notes | £000 | £000 | £000 | |
Balance at 1 January 2021 | 550 | 22,923 | 23,473 | |
Year ended 31 December 2021: | ||||
Profit and total comprehensive income for the year | - | 3,073 | 3,073 | |
Dividends | 9 | - | (5,371) | (5,371) |
Balance at 31 December 2021 | 550 | 20,625 | 21,175 | |
Year ended 31 December 2022: | ||||
Profit and total comprehensive income for the year | - | 5,323 | 5,323 | |
Dividends | 9 | - | (4,293) | (4,293) |
Balance at 31 December 2022 | 550 | 21,655 | 22,205 | |
The notes on pages 19 to 31 form an integral part of these financial statements.
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2022 | ||||
2022 | 2021 | |||
Notes | £000 | £000 | £000 | £000 |
Cash flows from operating activities | ||||
Cash generated from operations 19 | 19,437 | 16,965 | ||
Income taxes paid | (1,328) | (1,004) | ||
Net cash inflow from operating activities | 18,109 | 15,961 | ||
Investing activities | ||||
Cash placed in fixed term deposits | (19,379) | (15,406) | ||
Cash returned from fixed term deposits | - | 30,993 | ||
Interest received | 12,840 | 13,106 | ||
Net cash (used in)/generated from investing activities | (6,539) | 28,693 | ||
Financing activities | ||||
Repayment of bonds | (10,021) | (10,867) | ||
Interest paid | (12,598) | (12,814) | ||
Dividends paid | (4,293) | (5,371) | ||
Net cash used in financing activities | (26,912) | (29,052) | ||
Net (decrease)/increase in cash and cash equivalents | (15,342) | 15,602 | ||
Cash and cash equivalents at beginning of year | 24,910 | 9,308 | ||
Cash and cash equivalents at end of year | 9,568 | 24,910 | ||
The notes on pages 19 to 31 form an integral part of these financial statements.
FOR THE YEAR ENDED 31 DECEMBER 2022
Annes Gate Property PLC is a public company limited by shares registered, incorporated and domiciled in England and Wales. The registered office is 8 White Oak Square, London Road, Swanley, Kent, BR8 7AG.
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 financial statements are prepared on the historical cost basis.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest thousand.
As the consolidated financial statements of AGP Holdings (1) Limited include the equivalent disclosures, the Company has taken the exemptions under FRS 102 available in respect of the following disclosures:
The disclosures required by FRS 102.11 Basic Financial Instruments and FRS 102.12 Other Financial Instrument Issues in respect of financial instruments not falling within the fair value accounting rules of Paragraph 36(4) of Schedule 1.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements.
Estimates made by the directors in the application of these accounting policies that have significant effect on the financial statements and estimated with a significant risk of material adjustment in the next year are discussed in note 2.
The financial statements have been prepared on a going concern basis which the directors consider to be appropriate for the following reasons.
The Directors have prepared cash flow forecasts covering a period of at least 12 months from the date of approval of these financial statements which indicate that, taking account of severe but plausible downsides, the Company will have sufficient funds to meet its liabilities as they fall due for that period and to operate within the covenants on its external borrowings.
Specifically, the directors have considered if, in modelled severe but plausible downside scenarios, the level of operational performance of the Company would lead to service failure points being awarded against the Company in accordance with the terms of the Company’s contract with Her Majesty’s Principal Secretary of State for the Home Department sufficient to cause an event of default under the terms of the terms of the Company’s external borrowings. To date, there has been no material adverse impact on the Company’s cashflows or the service levels provided and no indication of heightened risk of subcontractor failure. As a result, the cashflow forecasts indicate that, even in downside scenarios, the Company will be able to meet its liabilities as they fall due.
Consequently, the Directors are confident that the Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.
Turnover in relation to service revenue is recognised in accordance with the finance debtor and service income accounting policy. Turnover in relation to pass through revenue is recognised when the services are performed. Revenue is entirely derived in the United Kingdom.
Cash and cash equivalents comprise cash balances and call deposits.
Restricted cash
The Company is obligated to keep a separate cash reserve in respect of future major maintenance and debt service costs, some of which has been placed in fixed term deposit accounts. This restricted balance, which is shown on the statement of financial position within the “cash at bank and in hand” balance for cash balances and within the “debtors due within one year” for amounts held in fixed term deposits, amounts to £19,390,000 at the year end (2021: £16,307,000).
Fixed term deposits with a maturity date of more than 3 months are treated as debtors due within one year.
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 balance sheet 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.
Basic financial assets
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Trade and other debtors / creditors
Trade and other debtors are recognised initially at transaction price less attributable transaction costs. Trade and other creditors are recognised initially at transaction price plus attributable transaction costs. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses in the case of trade debtors. If the arrangement constitutes a financing transaction, for example if payment is deferred beyond normal business terms, then it is measured at the present value of future payments discounted at a market rate of interest for a similar debt instrument.
Interest-bearing borrowings classified as basic financial instruments
Interest-bearing borrowings are recognised initially at the present value of future payments discounted at a market rate of interest. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method, less any impairment losses.
Impairment of financial assets
Financial assets (including trade and other debtors)
Financial assets are assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. For financial instruments measured at cost less impairment an impairment is calculated as the difference between its carrying amount and the best estimate of the amount that the Company would receive for the asset if it were to be sold at the reporting date.
Interest on the impaired asset continues to be recognised though the unwinding of the discount. Impairment losses are recognised in profit or loss. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Basic financial liabilities
Basic financial liabilities, including creditors, index-linked bonds and loans from fellow group companies that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method. The effective interest rate approach on inflation linked debt is to reflect only accrued inflation for the period up to the reporting date.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
The Company is an operator of a Private Finance Initiative ("PFI") contract. The Company entered into a project agreement (the "Contract") with Her Majesty’s Principal Secretary of State for the Home Department to design, build, finance, operate and maintain a building at 2 Marsham Street, London. The contract negotiations were successfully completed on 26 March 2002 and construction commenced immediately. The project has been fully operational since 26 January 2005. On 8 March 2022, the contract was novated to The Secretary of State for Levelling Up, Housing and Communities (the "Authority"). The concession period is for 29 years, during this period the company has contracted to provide hard and soft services to the Authority. The Company has passed these obligations down to a subcontractor via a subcontract. The obligation to provide major maintenance works (lifecycle) is undertaken by the Facilities Management Provider. The Contract does not entitle the Authority to any share of the profits of the Company.
The Authority are entitled to terminate the Contract at any time by giving 30 days written notice. If the Authority exercise this right they are liable to pay the Company compensation as set out in the Contract, which would include the senior debt, redundancy costs and other Facilities Management provider losses and the market value of the subordinated debt and shareholder equity.
As the Company entered into the contract prior to the date of transition to FRS102, the Company has taken advantage of the exemption in section 35.10 (i) of FRS102 which permits it to continue to account for the service concession arrangements under the accounting policies adopted under old UK GAAP. In particular, the underlying asset is not deemed to be an asset of the Company under old UK GAAP, because the risks and rewards of ownership as set out in that standard are deemed to lie principally with the Authority.
During the construction phase of the project, all attributable expenditure was included in amounts recoverable on contracts and turnover. Upon becoming operational, the costs were transferred to the finance debtor. During the operational phase the Authority pay the Company a fixed Unitary Charge payment, as determined in the Contract, that is inflated by RPI each year. Income is allocated between interest receivable and the finance debtor using a project specific interest rate. The remainder of the PFI unitary charge income is included within turnover in accordance with FRS102 section 23. The Company recognises revenue in respect of the services provided, including lifecycle services, as it fulfils its contractual obligations in respect of those services and in line with the fair value of the consideration receivable in respect of those services.
Accounting for the service concession contract and finance debtor requires an estimation of service margins, finance debtor interest rates and associated amortisation profile which is based on forecasted results of the PFI contract.
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the profit and loss account except to the extent that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised directly in equity or other comprehensive income.
Current tax
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax
Deferred tax is provided on timing differences which arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the financial statements. Deferred tax is not recognised on permanent differences arising because certain types of income or expense are non- taxable or are disallowable for tax or because certain tax charges or allowances are greater or smaller than the corresponding income or expense.
Deferred tax is measured at the tax rate that is expected to apply to the reversal of the related difference, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax balances are not discounted
Interest receivable and Interest payable
Interest payable and similar expenses include interest payable on borrowings and associated ongoing financing fees.
Other interest receivable and similar income include interest receivable on funds invested and interest recognised on the finance debtor based upon the finance debtor accounting policy above.
Interest income and interest payable are recognised in profit or loss as they accrue, using the effective interest method.
The preparation of financial statements in conformity with FRS102 requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based upon historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of revision and future periods if the revision affects both current and future periods.
Accounting for the service concession contract and finance debtor requires an estimation of service margins, finance debtor interest rates and associated amortisation profile which is based on forecasted results of the service concession contract. Lifecycle costs are a significant proportion of future expenditure. However, lifecycle risk is passed down to the service provider through a sub contract and they are paid on a contractual profile. As a result, the directors do not believe there is a significant level of judgement required in estimating future lifecycle expenditure.
Services revenue 29,828 27,288
Pass through income 4,988 1,658
34,816 28,946
4 Auditor's remuneration | 2022 | 2021 | |
Fees payable to the company's auditor and associates: | £000 | £000 | |
For audit services Audit of the financial statements of the group and company | 35 | 26 | |
5 Staff costs and Directors' remuneration | |||
The company had no employees during the year (2021: none). |
None of the directors received any emoluments from the company (2021: none). However, a total £164,000 (2021: £151,000) was made to Infrastructure Investment LP for the services of directors. | payment of | |
6 | Interest receivable and similar income 2022 | 2021 |
£000 Interest income Bank interest receivable 108 | £000 7 | |
Other interest receivable 9 Interest receivable on finance debtor 12,723 | - 13,099 | |
Total income 12,840 | 13,106 | |
7 | Interest payable and similar expenses 2022 | 2021 |
£000 Interest on financial liabilities measured at amortised cost: Interest payable on bonds 11,520 | £000 10,757 | |
Interest payable on subordinated debt 4,427 | 4,427 | |
15,947 | 15,184 | |
Of the above amount £4,427,000 (2021: £4,427,000) was payable to group undertakings. | ||
8 | Taxation 2022 | 2021 |
£000 Current tax UK corporation tax on profits for the current period 1,129 | £000 1,053 | |
Adjustments in respect of prior periods 654 | 453 | |
Total current tax 1,783 | 1,506 |
8 | Taxation | (Continued) | |
2022 | 2021 | ||
£000 | £000 | ||
Deferred tax Origination and reversal of timing differences | 127 | 562 | |
Changes in tax rates | - | 2,202 | |
Adjustment in respect of prior periods | (782) | (947) | |
Total deferred tax | (655) | 1,817 | |
Total tax charge | 1,128 | 3,323 |
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
2022 | 2021 | |
£000 | £000 | |
Profit before taxation | 6,451 | 6,396 |
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2021: 19.00%) | 1,226 | 1,215 |
Current tax adjustments in respect of prior year | 654 | 453 |
Deferred tax adjustments in respect of prior year | (782) | (947) |
Change in tax rate on deferred tax balances | - | 2,202 |
Movement in unrecognised deferred tax | 30 | 400 |
Taxation charge for the year | 1,128 | 3,323 |
The Company has tax losses of £33.7 million (2021: £35.9 million) which have been carried forward and will be offset against future taxable profits. A deferred tax liability has been recognised on accelerated capital allowances and tax losses have been set off against this.
9 | Dividends | ||||
2022 | 2021 | 2022 | 2021 | ||
Per share | Per share | Total | Total | ||
£ | £ | £000 | £000 | ||
Interim paid | 7.81 | 9.77 | 4,293 | 5,371 | |
Debt instruments measured at amortised cost 237,759 240,164
Measured at amortised cost 205,242 211,905
An explanation of the Company's objectives, policies and strategies for the role of the financial instruments in creating and changing the risks of the Company in its activities can be found in the Strategic Report. The details relating to credit, liquidity and interest rate risks are explained below:
Although the Authority is the only customer of the Company, the directors are satisfied that the Authority will be able to fulfil its obligations under the PFI contract as their obligations are underwritten by the Secretary of State for Levelling Up, Housing and Communities.
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The company's financial obligations, including the repayment of its borrowings which are provided on a long term basis, have been structured to be met from the income which under normal operating conditions, will be earned from its long term concession contract with the Authority as their obligations under the Project Agreement are underwritten by the Secretary of State for Levelling Up, Housing and Communities.
The company aims to manage exposure to interest rate fluctuations through a balance of fixed rate borrowings along with floating rate borrowings (index-linked bonds). Except for the index-linked guaranteed secured bonds which are subject to bi-annual indexation calculated from an agreed formula based on the change in the Retail Prices Index, all the other interest-bearing assets and liabilities are primarily of fixed rate. The indexation risk is also offset by turnover being subject to similar indexation terms.
The company manages its capital to ensure it is able to continue as a going concern and to maintain an optimal capital structure to reduce the cost of capital. The capital structure of the Company comprises equity attributable to equity holders consisting of ordinary share capital, reserves and retained earnings as disclosed in the Statement of Changes in Equity.
In managing interest rate risks the Company aims to reduce the impact of short-term fluctuations on the Company's earnings. The index-linked bonds' indexation variations are offset by indexation on future income from the Authority. The Company's exposure to interest rate fluctuations is therefore restricted to amounts that can be earned on cash deposits. This risk is not considered to have a significant impact on overall returns.
11 Debtors | 2022 | 2021 | |
Amounts falling due within one year: | £000 | £000 | |
Trade debtors | 20 | 76 | |
Unitary charge control account | - | 2,891 | |
Consortium tax relief receivable | 25 | 85 | |
Finance debtor | 6,860 | 6,462 | |
Other financial assets | 19,379 | - | |
Corporation tax | 590 | 930 | |
Prepayments and accrued income | 276 | 198 | |
27,150 | 10,642 | ||
2022 | 2021 | ||
Amounts falling due after more than one year: | £000 | £000 | |
Finance debtor | 201,658 | 208,518 | |
201,658 | 208,518 | ||
Total debtors | 228,808 | 219,160 | |
Other financial assets are fixed term bank deposits with a maturity date of more than 3 | months. | ||
12 Creditors: amounts falling due within one year | 2022 | 2021 | |
Notes | £000 | £000 | |
3.237% Indexed-linked guranteed secured bonds due 2030 14 | 5,279 | 9,912 | |
Interest on subordinated debt 14 | 2,229 | 2,229 | |
Trade creditors | 20 | 22 | |
Unitary charge control account | 433 | - | |
Other taxation and social security | 1,163 | 1,050 | |
Other creditors | 1,197 | 1,149 | |
Accruals and deferred income | 1,406 | 1,394 | |
11,727 | 15,756 |
The full unitary charge control account is forecast to be paid within the next 12 months via unitary charge receipts with amounts being offset by service concession accounting adjustments. The key driver for the unitary charge control account moving from a debtor position in 2021 to a creditor position in 2022 was the lower level of lifecycle costs in the current year on which margin is taken.
13 Creditors: amounts falling due after more than one year | 2022 | 2021 | |
Notes | £000 | £000 | |
Fixed rate interest bonds | 14 | 101,415 | 101,415 |
Subordinated debt | 14 | 29,974 | 29,974 |
3.237% Index-linked guranteed secured bonds 2030 | 14 | 64,919 | 66,959 |
196,308 | 198,348 | ||
14 Interest bearing loans and borrowings | 2022 | 2021 | |
£000 | £000 | ||
Fixed rate interest bonds | 101,415 | 101,415 | |
Subordinated debt | 32,203 | 32,203 | |
3.237% Index-linked guranteed secured bonds 2030 | 70,198 | 76,871 | |
203,816 | 210,489 | ||
Payable within one year | 7,508 | 12,141 | |
Payable after one year | 196,308 | 198,348 | |
203,816 | 210,489 | ||
Included within index-linked guaranteed secured bonds | is an amount | repayable after | five years of |
£32,517,000 (2021: £31,760,000) and included within fixed rate interest bonds is an amount repayable after five years of £101,415,000 (2021: £101,415,000) respectively. Subordinated debt amount repayable after five years is £29,974,000 (2021: £29,974,000).
3.237% Index-linked Guaranteed Secured bonds and 5.661% fixed rate interest bonds are secured by a fixed and floating charge over the assets of the Company.
The fixed rate interest bonds are fixed at an interest rate of 5.661% and will be redeemed on their maturity in 2031. The Index-linked Guaranteed Secured bonds are fixed at an interest rate of 3.237% which along with principal payments, are indexed to Retail Price Index using an agreed ratio. The indexed bonds repayments commenced in 2006 and are fully redeemed by 2030.
The subordinated debt issued to the company by its parent bears interest at 14.75% with interest repayments commencing in 2006 until 2031, and all the capital will be repaid in September 2031. The subordinated debt is secured against the assets of the Company and are subordinated to the senior bonds.
The indexed-linked bonds and fixed rate interest bonds are each valued at amortised cost, using the effective interest rate method, taking account of projected indexation across the term of the liability. The index-linked bond has an effective interest rate of 3.23% (2021: 3.23%). The fixed rate interest bond has an effective interest rate of 5.661% (2021: 5.661%).
Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes.
Liabilities 2022 | Liabilities 2021 | |
Balances: | £000 | £000 |
Accelerated capital allowances | 9,521 | 10,219 |
Tax losses for prior periods | (8,318) | (8,993) |
Other timing differences | 6,933 | 7,565 |
8,136 | 8,791 | |
2022 | ||
Movements in the year: | £000 | |
Liability at 1 January 2022 | 8,791 | |
Credit to profit or loss | (655) | |
Liability at 31 December 2022 | 8,136 |
The deferred tax liability has been recognised on accelerated capital allowances, offset by tax losses which can be used against future profits of the company.
16 | Share capital and reserves | ||||
2022 | 2021 | 2022 | 2021 | ||
Ordinary share capital | Number | Number | £000 | £000 | |
Issued and fully paid | |||||
of £1 each | 549,999 | 549,999 | 550 | 550 | |
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
After the year end, the directors have proposed dividends of £1,718,000. This has not been included within creditors as it was not approved before the year end.
During the year the company entered into the following transactions with related parties:
ByHome Ltd Some Board members also sit on the Board of this counterparty
Enterprise Education Conwy Ltd Entity under common control
Infrastructure Investments LP Entity under common control
Metier Healthcare Ltd Entity under common control
Ravensbourne Health Services Ltd Entity under common control
Services Support (Manchester) Ltd Entity under common control
Description of transaction | Sales | Purchases | |||
2022 | 2021 | 2022 | 2021 | ||
£'000 | £'000 | £'000 | £'000 | ||
ByHome Ltd | Facility Management Services | - | - | 15,362 | 14,369 |
ByHome Ltd | Variations | - | - | 4,988 | 1,658 |
ByHome Ltd | Life cycle | - | - | 3,866 | 3,305 |
Infrastructure Investments LP | Directors' fees | - | - | 164 | 151 |
AGP Holdings (1) Limited | Sub debt interest | - | - | 4,427 | 4,427 |
Amounts owed to/by related parties |
The following amounts were outstanding at the reporting end date:
2022 | 2021 | 2022 | 2021 | |
£000 | £000 | £000 | £000 | |
Enterprise Education Conwy Ltd | - | - | - | 90 |
Metier Healthcare Ltd | - | - | - | 19 |
Ravensbourne Health Services Ltd | - | - | 25 | 6 |
Services Support (Manchester) Ltd | - | 30 | - | - |
AGP Holdings (1) Ltd (sub debt capital) | 29,974 | 29,974 | - | - |
AGP Holdings (1) Ltd (sub debt interest) | 2,229 | 2,229 | - | - |
The Company is a subsidiary undertaking of AGP Holdings (1) Limited incorporated in the United Kingdom. The registered office is 8 White Oak Square, London Road, Swanley, BR8 7AG. Infrastructure Investments (Portsmouth) Limited is the shareholder of AGP Holdings (1) Limited and indirectly it is the majority shareholder of AGP Plc. The registered office of Infrastructure Investments (Portsmouth) Limited is One Bartholomew Close, Barts Square, London, England, EC1A 7BL.
The smallest and largest Group in which the results of the Company are consolidated is that headed by AGP Holdings (1) Limited. The consolidated accounts of this Group are available to the public and may be obtained from its registered office 8 White Oak Square, London Road, Swanley, BR8 7AG.
The ultimate parent company is HICL Infrastructure Plc, a company listed on the London Stock Exchange and registered at One Bartholomew Close, Barts Square, London, England, EC1A 7BL.
19 Cash generated from operations | 2022 | 2021 | |||
£000 | £000 | ||||
Profit for the year after tax | 5,323 | 3,073 | |||
Adjustments for: Taxation charged | 1,128 | 3,323 | |||
Finance costs | 15,947 | 15,184 | |||
Investment income | (12,840) | (13,106) | |||
Movements in working capital: Decrease in debtors | 9,825 | 8,447 | |||
Increase in creditors | 54 | 44 | |||
Cash generated from operations | 19,437 | 16,965 | |||
20 Analysis of changes in net debt | |||||
Borrowings due within one year | Borrowings due in more than one year | Subtotal | Cash and other cash equivalents | Net debt | |
£000 | £000 | £000 | £000 | £000 | |
Balance at 1 January 2022 | (12,141) | (198,348) | (210,489) | 24,910 | (185,579) |
Cashflows | 10,021 | - | 10,021 | (15,342) | (5,321) |
Other non-cash changes | (5,388) | 2,040 | (3,348) | - | (3,348) |
Balance at 31 December 2022 | (7,508) | (196,308) | (203,816) | 9,568 | (194,248) |