TIDM57OE
RNS Number : 1633J
Endeavour SCH PLC
27 June 2011
Company Registration Number 03672185
ENDEAVOUR SCH PLC
REPORT AND STATEMENT OF ACCOUNTS
31 DECEMBER 2010
Page
COMPANY INFORMATION 1
REPORT OF THE DIRECTORS 2
STATEMENT OF DIRECTORS' RESPONSIBILITIES 5
INDEPENDENT AUDITOR'S REPORT 6
PROFIT AND LOSS ACCOUNT 7
BALANCE SHEET 8
CASH FLOW STATEMENT 9
NOTES TO THE ACCOUNTS 10-22
Registered Office
The James Cook University Hospital
The Murray Building
Marton Road
Middlesbrough
TS4 3BW
Serving Directors
J Graham
N Rae
Alternate Directors
A Ritchie
I Hudson
Company Secretary
G Perez-Luna
Auditor
PKF (UK) LLP
Farringdon Place
20 Farringdon Road
London
EC1M 3AP
Bankers
Barclays Bank PLC
54 Lombard Street
London
EC3P 3AH
Legal Advisors
Pinsent Masons LLP
1 Park Row
Leeds
LS1 5AB
Paying Agent
The Bank of New York
One Canada Square
London
E14 5AL
ENDEAVOUR SCH PLC
REPORT OF THE DIRECTORS
The Directors have pleasure in submitting their Report and
Statement of Accounts for the year ended 31 December 2010.
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
Principal Activities
The Company's principal activity is that of Private Finance
Initiative Concessionaire for the South Tees Acute Hospitals Single
Site Project, under the terms of a Concession Agreement dated 16
August 1999 between the Company and South Tees Acute Hospitals
National Health Service Trust ('the Trust').
The Company's Concession Agreement requires it to finance,
design, develop and construct and then maintain and part operate
the enlarged hospital following completion of new facilities and
certain other work. The concession is intended to continue for a
period of 30 years after hospital completion which occurred on 16
July 2003, and the project is now in its operational phase.
Principal Risks and Uncertainties
Availability
Investment in the Project is funded primarily by Index Linked
Secured Guaranteed Bonds ('the Bonds') and subordinated unsecured
loan stock. During the operational phase the principal source of
funds available to meet its liabilities under the Bonds will be
Availability Payments received from the Trust under the Concession
Agreement. Failure to achieve the forecast levels of availability
would result in lower than forecast revenues and this may adversely
affect the company's ability to make payments to Bondholders. There
have been no deductions for unavailability in the periods covered
in these financial statements.
Major Maintenance
The Company is obliged under the Concession Agreement to
undertake major maintenance and plant/equipment replacement so that
it continues to satisfy the standards required. There are a number
of factors which could lead to higher than projected costs, such as
shorter than anticipated life spans or increased inflation on
specific items of plant and equipment or worse than expected
condition of the residual estate. This risk has been mitigated
through contractual arrangements with the subcontractor undertaking
this work, as 25% of the risk of asset failure is shared with the
subcontractor.
Service Performance
The Soft Services and Maintenance Services are monitored against
agreed objective measures. Ultimately, poor performance may result
in the Trust having the right to terminate the Concession
Agreement. There have been no deductions for poor performance in
the periods covered in these financial statements.
Trust Status and Performance
Failure by the Trust to perform its obligations may affect the
Company's ability to meet its liabilities to Bondholders. However
the Trust's obligations under the Concession Agreement are
underwritten by the Secretary of State for Health.
Business Review
Income for the year of GBP39.82m (2009: GBP36.24m) and operating
profit of GBP15.78m (2009: GBP15.98m) was in line with
expectations.
Profit before tax is GBP4.28m (2009: GBP10.33m), and after an
increase in the deferred tax provision of GBP0.82m and payment of
GBP5.88m dividends (2009: GBP3.56m), retained (loss) / profit for
the year is GBP(2.41)m (2009: GBP3.66m).
Interest payable is GBP11,624 (2009: GBP5,782) and this increase
is due to a higher indexation charge on the bonds in the year ended
31 December 2010 as RPI for this period was significantly higher
than the prior year.
In the opinion of the Directors, the project has achieved
satisfactory performance in the period under review.
Key Performance Indicators
The Company's operations are managed under the supervision of
its shareholders and funders and are largely determined by the
detailed terms of the Concession Agreement. For this reason, the
Company's Directors believe that further key performance indicators
for the Company are not necessary or appropriate for an
understanding of the performance or position of the Company.
Historical Performance
The Company is obliged to meet the conditions laid down in the
Bond Trust Deed and Collateral Deed. To the best of the Directors'
knowledge the Company has met all of the obligations contained
within these Deeds and there have been no Events of Default,
Potential Events of Default or Trigger Events with regards to these
Deeds.
PROVISION OF INFORMATION TO THE AUDITOR
As far as each of the Directors are aware, at the time this
report was approved:
-- there is no relevant available information of which the
auditor is unaware; and
-- they have taken all steps that ought to have been taken to
make themselves aware of any relevant audit information and to
establish that the auditor is aware of that information.
GOING CONCERN
After making enquiries, the Directors have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. For this reason
they have adopted the going concern basis in preparing the
accounts.
RESULTS AND DIVIDENDS
The result for the year was a profit after tax for the financial
year of GBP3.47m (2009: GBP7.22m). The Directors have proposed and
paid dividends during 2010 of GBP5.88m (2009: GBP3.56m).
DIRECTORS
The following persons served as Directors of the Company during
the year.
J N Bridge (resigned 30 March 2011)
B W Dalgleish (resigned 9 March 2011)
J Graham
S Nathan (resigned 30 September 2010)
N Rae
I Hudson (appointed 21 October 2010)
A Ritchie (appointed 9 March 2011)
FINANCIAL INSTRUMENTS
The Company does not undertake financial instrument transactions
which are speculative or unrelated to the Company's trading
activities. The Company's funding has been arranged using the
principles of project finance with the terms of the financial
instruments, and the resulting profile of the debt service costs,
tailored to match the expected revenues arising from the Concession
Agreement.
Board approval is required for the use of any new financial
instrument, and the Company's ability to do so is restricted by
covenants in its existing funding agreements.
Other disclosures in respect of financial instruments are given
in notes 9, 10, 11, 12, 13 and 15 to the financial statements.
POLICY ON PAYMENT OF SUPPLIERS
The Company's policy is to settle the terms of payment with
suppliers when agreeing the terms of each transaction or series of
transactions, and to abide by these terms of payment where it is
satisfied the supplier has provided the goods or services in
accordance with the agreed terms.
The average time taken to pay suppliers at the year end was 27
days (2009: 23 days).
CORPORATE GOVERNANCE STATEMENT
Historical Performance
The Company is obliged to meet the conditions laid down in the
Bond Trust Deed and Collateral Deed. To the best of the Directors'
knowledge the Company has met all of the obligations contained
within these Deeds and there have been no Events of Default,
Potential Events of Default or Trigger Events with regards to these
Deeds.
The company is obliged to maintain a rating with Moody's. The
company considers the rating given to it satisfactory.
Financial reporting, risk and internal controls
The Company has outsourced the financial reporting function to
Health Care Projects Limited. The Board receives monthly reports
from Health Care Projects Limited which address specific risks to
the Company in a Risk Register which contains a summary of all
material and possible risks which the Company is exposed to, and is
pertinent to the industry in which the Company operates and the
Company's customer and sub-contractor environment. 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.
Significant shareholdings and special rights
The Company is 100% owned by Endeavour SCH Holdings Limited.
Endeavour SCH Holdings Limited is owned by Semperian PPP Investment
Partners N(o) 2 Limited (43.83%) and Innisfree M&G PPP LP
(56.17%). Both the shareholders in Endeavour SCH Holdings Limited
are UK Limited Partnerships and each holds its shareholding as a
long term investment.
None of the Company's ordinary shares carry any special rights
with regard to the control of the Company. There are no known
arrangements under which financial rights are held by a person
other than the holder of the shares and no known agreements on
restrictions on share transfers or on voting rights.
Director's appointment and replacement, allotments of shares and
control provisions
The rules about the appointment and replacement of directors are
contained in the Company's Articles of Association. Changes to the
Articles of Association must be approved by the shareholders in
accordance with the legislation in force at the time. The powers of
the directors are determined by UK legislation and the Memorandum
and Articles of Association of the Company in force from time to
time.
The directors have in the past been authorised to issue and
allot ordinary shares and such powers have expired.
The Company is not party to any significant agreements that
would take effect, alter or terminate upon a change of control
following a takeover bid. The Company also does not have agreements
with any director or employee that would provide compensation for
loss of office or employment resulting from a takeover.
On behalf of the Board
......................................
Ian Hudson
Director
26 April 2011
ENDEAVOUR SCH PLC
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Report of the
Directors and the financial statements in accordance with
applicable law and regulations. They are also responsible for
ensuring that the annual report includes information required by
the Listing Rules of the Financial Services Authority.
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
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law). Under company law
the Directors must not approve the financial statements unless they
are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for
that period. In preparing these financial statements the Directors
are required to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgments and estimates that are reasonable and
prudent;
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors confirm, to the best of their knowledge:
-- that the financial statements, which have been prepared in
accordance with UK Generally Accepted Accounting Practice, give a
true and fair view of the assets, liabilities, financial position
and profit or loss of the Company; and
-- that the report of the directors' 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 it faces.
The names and functions of all the Directors are stated on page
one.
On behalf of the Board
......................................
Ian Hudson
Director
26 April 2011
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF
ENDEAVOUR SCH PLC
We have audited the financial statements of Endeavour SCH plc
for the year ended 31 December 2010 which comprise the profit and
loss account, the balance sheet, the cash flow statement and the
related notes. The financial reporting framework that has been
applied in their preparation is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting
Practice).
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditor
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view. Our responsibility is to audit 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
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the company's circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we
read all the financial and non-financial information in the report
and statement of accounts to identify material inconsistencies with
the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the
implications for our report.
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 December 2010 and of its profit for the year then
ended;
-- have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
-- have been prepared in accordance with the requirements of the
Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the report of the
directors 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.
Jason Homewood (Senior statutory auditor)
for and on behalf of PKF (UK) LLP, Statutory auditor
London - UK
2011
ENDEAVOUR SCH PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
YEAR ENDED 31 DECEMBER 2010
2010 2009
Notes GBP'000 GBP'000
TURNOVER 2 39,816 36,240
Cost of sales (24,030) (20,259)
OPERATING PROFIT 3 15,786 15,981
Interest receivable 123 127
Interest payable 4 (11,624) (5,782)
PROFIT ON ORDINARY ACTIVITIES BEFORE
TAXATION 4,285 10,326
Taxation on profit on ordinary activities 6 (819) (3,102)
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 3,466 7,224
A statement of movement in shareholders' funds is shown in note
18 to the financial statements.
The results reported above relate to continuing activities.
There were no recognised gains or losses in the period other than
the above reported profit.
DIVIDENDS
Ordinary dividend paid not previously accrued 5,875 3,561
The notes on pages 10 to 22 form part of these financial
statements.
ENDEAVOUR SCH PLC (Company number 03672185)
BALANCE SHEET
AS AT 31 DECEMBER 2010
2010 2009
Notes GBP'000 GBP'000
FIXED ASSETS
Tangible Assets 8 23 35
CURRENT ASSETS
Debtors - Amounts falling due within
one year
Debtors - Amounts falling due after 9 4,230 4,114
more than one year 10 140,589 141,811
Cash at Bank 11 17,248 20,278
162,067 166,203
CREDITORS - Amounts falling due within
one year 12 (11,332) (15,013)
NET CURRENT ASSETS 150,735 151,190
TOTAL ASSETS LESS CURRENT LIABILITIES 150,758 151,225
CREDITORS - Amounts falling due after
more than one year 13 (126,799) (126,790)
PROVISIONS FOR LIABILITIES 14 (14,467) (12,534)
NET ASSETS 9,492 11,901
CAPITAL AND RESERVES
Called Up Share Capital 16 50 50
Profit and Loss Account 7 9,442 11,851
EQUITY SHAREHOLDERS' FUNDS 18 9,492 11,901
These financial statements were approved and authorised for
issue by the Board of Directors and were signed on its behalf on 26
April 2011.
Ian Hudson
Director
The notes on pages 10 to 22 form part of these financial
statements.
ENDEAVOUR SCH PLC
CASH FLOW STATEMENT
YEAR ENDED 31 DECEMBER 2010
2010 2009
Notes GBP'000 GBP'000
Net Cash Inflow from Operating
Activities 18,297 18,619
Returns on Investments and Servicing
of Finance
Interest Received 125 105
Interest Paid (7,188) (5,613)
Net Cash (Outflow) on Returns
on Investments and Servicing
of Finance (7,063) (5,508)
Equity Dividends Paid (5,875) (3,561)
Investing activities
Capital expenditure - (9)
Financing
Bond - redemption (8,389) (8,898)
(Decrease) / Increase in Cash 19 (3,030) 643
Reconciliation of Operating Year Ended Year Ended
Profit to Net Cash Inflow from 31.12.10 31.12.09
Operating Activities GBP'000 GBP'000
Operating Profit 15,786 15,981
Depreciation charged 12 7
Decrease in debtors 1,112 2,679
Increase in creditors 273 478
Net movement in provisions 1,114 (526)
Net Cash Inflow from Operating
Activities 18,297 18,619
The notes on pages 10 to 22 form part of these financial
statements.
ENDEAVOUR SCH PLC
NOTES TO THE ACCOUNTS
YEAR ENDED 31 DECEMBER 2010
1 ACCOUNTING POLICIES
The following accounting policies have been applied consistently
in dealing with items that are considered material in relation to
the Company's financial statements.
a) Basis of preparation
The financial statements have been prepared in accordance with
applicable accounting standards and under the historical cost basis
or the fair value basis where the fair valuing of relevant assets
and liabilities has been applied.
b) Finance debtor
Costs incurred in building the acute hospital have been treated
as a finance debtor as in the opinion of the Directors, the Trust
enjoys substantially all the risks and rewards of ownership.
Unitary charges received from the Trust are allocated between
services income, interest receivable and the repayment of the
finance debtor using a property specific rate so as to generate a
constant rate of return in respect of the finance debtor over the
life of the concession.
The finance debtor also includes accrued services income
representing the difference between cumulative services income
recognised in the profit and loss account and the Unitary Charge
invoiced to the Trust.
Costs incurred in respect of Variation works over the course of
the contract are added to the finance debtor with related
contributions from the Trust being credited to it.
c) Turnover
Unitary charges are allocated between service income, interest
receivable on the finance debtor and reimbursement of the finance
debtor so as to generate a constant return in respect of the
finance debtor over the life of the contract.
Turnover reflects the income allocated to the services provided
as part of the overall project, and the interest receivable on the
finance debtor.
A margin is applied to costs charged to the profit and loss
account to calculate the service income credited to the profit and
loss account. This margin is calculated as total income forecast to
be receivable over the concession, less all life cycle and other
operating costs forecast to be payable over the concession.
d) Fixed assets
Depreciation is provided by the straight line method based on
anticipated useful lives as follows:
Equipment 2 - 4 years
Fixtures and fittings 10 - 25 years
e) Debt issue costs
Issue costs in respect of the Company's debt are recognised over
the life of the debt using the effective interest rate method and
are deducted from the carrying value of the related debt.
f) Deferred tax
As required by FRS 19 "Deferred Tax", full provision is made for
deferred tax assets and liabilities arising from all timing
differences between the recognition of gains and losses in the
financial statements and recognition in the tax computation, except
for those timing differences in respect of which the standard
specifies that deferred tax should not be recognised.
Deferred tax assets and liabilities are calculated at the tax
rates expected to be effective at the time the timing differences
are expected to reverse. Deferred tax balances are not
discounted.
1 ACCOUNTING POLICIES (Continued)
g) Life cycle costs
The estimated cost of the Company's obligation to maintain the
hospital over the period of its agreement with the Trust is charged
to the profit and loss account as the obligation arises. A
provision has been included in the balance sheet in respect of
these costs.
h) Capitalised interest
The interest cost of financing the Company's obligations under
its Concession Agreement during the construction phase has been
capitalised and was included in the value of asset in course of
construction prior to reclassification as a finance debtor.
i) Financial Instruments
Financial instruments are recognised when the Company becomes a
party to the contractual provisions of the instrument. The
principal financial assets and liabilities of the Company are as
follows:
Trade debtors
Trade receivables are initially recognised at fair value and
then are stated at amortised cost.
Cash at bank
Cash at bank is carried in the balance sheet at nominal
value.
Trade creditors
Trade payables are initially recognised at fair value and then
are stated at amortised cost.
Bank and other borrowings
Interest bearing bank loans, bonds, subordinated debt and other
loans are recognised initially at fair value. All borrowings are
subsequently stated at amortised cost with the difference between
initial net proceeds and redemption value recognised in the profit
and loss account over the period to redemption.
Finance debtor
The finance debtor is classified as loans and receivables as
defined in paragraph 9 of FRS 26, which are initially recognised at
fair value and then are stated at amortised cost.
Accounting estimates and judgements
In applying the accounting policies detailed above, decisions
sometimes have to be made as to the likely outcome of future
events. Those judgements and estimates are based on historical
experience and assumptions that the Directors believe reasonable in
the circumstances. The Directors consider the key judgements and
estimates made in preparing the financial statements to have been
those relating to the calculation of the margin applied to costs in
recognising revenue and the recognition of life cycle costs. These
judgements and estimates are discussed in more detail above.
2 TURNOVER
Turnover represents the value of work done and excludes value
added tax. All turnover is derived in the United Kingdom, and from
the principal business segment which is the provision of
non-clinical services to maintain the availability of hospital
facilities.
3 OPERATING PROFIT
Operating profit is stated after charging:
Year Ended Year Ended
31.12.10 31.12.09
GBP'000 GBP'000
Depreciation of tangible fixed
assets 12 7
Auditor's remuneration
Fees for the audit of the
company's accounts 16 16
Other services relating to
taxation 2 7
All other services 1 3
Directors' emoluments
Directors' Fees - see note 1
below 25 35
Directors' Fees - see note 2 - 137
below Chairman's Fees 41 40
Directors' Emoluments - 13
- 13
1. These Directors' fees were paid to Innisfree Nominees Limited
and Semperian PPP Investment Partners N(o) 2 Limited for provision
of the non-executive Directors' services.
2. These Directors' fees were paid to Health Care Projects
Limited for provision of the executive Directors' services (see
Note 5). Included within this amount is GBP30,000 in the prior year
in respect of compensation for loss of office payable to one
Director. There were no executive Directors employed by Health Care
Projects Limited in the year ended 31 December 2010.
4 INTEREST PAYABLE
Year ended Year Ended
31.12.10 31.12.09
GBP'000 GBP'000
Secured 3.607% Index Linked Bonds
2031 9,444 3,815
Amortisation of Bond Issue Costs 336 177
Unsecured Subordinated Debt 1,844 1,790
Interest Payable 11,624 5,782
Interest payable on the secured 3.607% Index Linked Bonds 2031
includes bond interest and bond indexation.
5 STAFF COSTS
Year ended Year ended
31.12.10 31.12.09
GBP'000 GBP'000
Wages and Salaries - 22
Social Security Costs - 6
- 28
From 1 February 2009 onwards all directors and staff employed
directly by the Company transferred their contracts of employment
and pensions rights (where applicable) to Health Care Projects
Limited and are remunerated monthly by Health Care Projects
Limited.
The average number of persons employed by the Company during the
year was:
Year ended Year ended
31.12.10 31.12.09
Directors - 1
Staff - 1
- 2
6 TAXATION
Year ended Year ended
(a) The tax charge comprises: 31.12.10 31.12.09
Current tax: GBP'000 GBP'000
UK corporation tax on profits - -
Total current tax (note 6(b)) - -
Deferred tax: (note 14)
Origination and reversal of
timing differences Adjustments in 1,022 3,102
respect of prior years (203) -
Tax on profit on ordinary
activities 819 3,102
(b) Factors affecting the tax charge
for the year:
The tax assessed for the year is lower
than the standard rate of corporation Year ended Year ended
tax in the UK of 28% (2009: 28%). 31.12.10 31.12.09
The differences are explained below: GBP'000 GBP'000
Profit on ordinary activities
before taxation 4,285 10,326
Profit on ordinary activities
before taxation multiplied by
standard rate of corporation tax
in the UK of 28% (2009: 28%)
Effects of: 1,199 2,891
Taxable income credited to the
Finance debtor 753 665
Utilisation of tax losses (944) (2,316)
Other items Capital allowances 67 29
and short lease premium relief (1,075) (1,269)
Current tax charge for year - -
6 TAXATION (Continued)
(c) Factors that may affect future tax charges:
The corporation tax charge is expected to remain as GBPNil for
several more years as there are estimated to be tax losses in the
order of GBP38 million (2009: GBP41 million) as at 31 December 2010
which are available to carry forward against future profits (see
note 14).
7 PROFIT AND LOSS ACCOUNT
GBP'000
At 1 January 2010 11,851
Profit for the year 3,466
Dividends paid (5,875)
At 31 December 2010 9,442
8 TANGIBLE FIXED ASSETS
Fixtures,
fittings
and equipment
Cost GBP'000
As at 1 January 2010 and 31
December 2010 45
Accumulated Depreciation
As at 1 January 2010 10
Provided in the Year 12
As at 31 December 2010
Book Value 22
As at 31 December 2010 23
As at 31 December 2009 35
9 DEBTORS : AMOUNTS FALLING DUE WITHIN ONE YEAR
31.12.10 31.12.09
GBP'000 GBP'000
Trade Debtors 1,035 1,202
Finance Debtor 2,879 2,514
Prepayments and Accrued Income 316 398
4,230 4,114
10 DEBTORS : AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
31.12.10 31.12.09
GBP'000 GBP'000
Finance Debtor 140,189 141,411
Other Debtors 400 400
140,589 141,811
Finance Debtor brought forward 143,925 147,214
Interest Receivable 9,747 9,846
Repayment in the year (10,604) (12,221)
Accrued/(deferred) service income - (914)
Finance Debtor carried forward 143,068 143,925
Finance Debtor analysed :
Due within one year 2,879 2,514
Due after more than one year 140,189 141,411
143,068 143,925
11 CASH AT BANK
31.12.10 31.12.09
GBP'000 GBP'000
Cash at bank 17,248 20,278
Cash at bank earns interest at floating rates based principally
on short-term inter-bank rates.
12 CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR
31.12.10 31.12.09
GBP'000 GBP'000
Secured 3.607 % Index Linked Bonds
2031 5,363 8,388
Trade Creditors 1,635 1,505
Other Taxes and Social Security 1,460 1,242
Accruals and Deferred Income 2,874 3,878
11,332 15,013
13 CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
31.12.10 31.12.09
GBP'000 GBP'000
Subordinated Debt 14,914 14,914
Secured 3.607 % Index Linked
Bonds 2031 111,885 111,876
126,799 126,790
Index Linked Bond
31.12.10 31.12.09
GBP'000 GBP'000
Secured 3.607% Index Linked Bonds
2031 89,640 96,040
Add: Cumulative Indexation 30,617 27,570
120,257 123,610
Less: Unamortised Net Issue Costs (3,010) (3,346)
117,247 120,264
The bonds are repayable as follows:
Within one year 5,363 8,388
Within 1 to 2 years 5,805 5,363
Within 2 to 5 years 16,347 17,218
After more than 5 years 92,742 92,641
GBP137,400,000 secured index linked bonds 2031 were created on
16 August 1999 of which GBP128,900,000 were issued and sold at
99.992%. The bonds bear interest at 3.607% per annum of their
principal amount outstanding. Interest is payable semi-annually in
arrears on 28 March and 28 September. The amount of principal
outstanding from time to time is subject to indexation in
accordance with the terms of the Bond Trust Deed.
The Company retained GBP8,500,000 index linked bonds 2031
("variation bonds") which it could sell, subject to certain
restrictions in the Collateral Deed, to finance contingencies. On
30 November 2000 the Company sold GBP5,000,000 of the variation
bonds to fund variations on the hospital construction contract.
The remaining GBP3,500,000 of unsold Variation Bonds were
cancelled on 14 February 2009 by the Principal Paying Agent, as
instructed by the issuer and in accordance with the Bond Trust Deed
and the Paying Agency Agreement.
The bonds are repayable in instalments which commenced in March
2005 and should end in March 2031.
The Company's secured creditors have the benefit of first
ranking charges granted by the Company over the whole of its
investments, undertaking, property, assets, insurances and rights
under certain contracts, both present and future, together with a
first ranking charge over all of the ordinary shares of the Company
and the Company's subordinated loan stock and those of its holding
Company, Endeavour SCH Holdings Limited.
13 CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
(Continued)
Unsecured Loan Stock 2032 (Subordinated debt)
The Company is a wholly beneficially owned subsidiary of
Endeavour SCH Holdings Limited. The beneficial owners of the
holding Company are Innisfree M & G PPP LP, through its nominee
Innisfree Nominees Limited and Semperian PPP Investment Partners
N(o) 2 Limited.
On 16 August 1999, the Company and Endeavour SCH Holdings
Limited created GBP23,060,000 unsecured Loan Notes 2032,
constituted under Deed Polls entered into on the same date. On 30
November 2000 a further GBP1,400,000 of Loan Notes were created to
fund variations required on the construction contract.
Under the terms of an Equity Subscription Agreement dated 16
August 1999 as amended on 30 November 2000, the Shareholders of the
holding Company agreed to subscribe for Loan Stock of Endeavour SCH
Holdings Limited to the value of GBP24,460,000. Endeavour SCH
Holdings Limited in turn agreed to subscribe for up to
GBP24,460,000 of the Loan Stock of the Company. The proceeds of the
stock issue are being used by the Company to finance its
obligations under its contract with the Trust.
A proposal by the shareholders to change the payment profile of
outstanding subordinated debt principal has been approved by FSA.
The payments due during 2008 and 2009 have been added to the final
principal payment, which is due in December 2032. The final
principal payment becomes GBP14,914,349 which was the amount
outstanding at 31 December 2010. Interest will be calculated on
this outstanding principal, and will continue to be paid twice
yearly as normal.
The Notes are repayable as follows:
31.12.10 31.12.09
GBP'000 GBP'000
After more than 5 years 14,914 14,914
Interest is payable on the Notes at a rate of 12% per annum with
effect from 10 June 2003.
Where the Notes are redeemed after 30 September 2003, the price
will be the higher of par less any amount already redeemed and that
price, expressed as a percentage, at which the Gross Redemption
Yield on the Notes would be equal to the Gross Redemption Yield on
such other United Kingdom Government Stock as the Company shall
determine to be appropriate based on the middle market price of the
reference stock on the third dealing day prior to the proposed date
of redemption.
13 CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
(Continued)
The interest rate risk profile of the Company's financial
liabilities is as follows:
Fixed rate Fixed rate
weighted weighted
average average
interest time for
Floating rate at which rate
Total rate Fixed rate 31 December is fixed
2010 2010 2010 2010 2010
GBP'000 GBP'000 GBP'000 % Years
Sterling 135,171 120,257 14,914 12.0 23
Fixed rate Fixed rate
weighted weighted
average average
interest time for
Floating rate at which rate
Total rate Fixed rate 31 December is fixed
2009 2009 2009 2009 2009
GBP'000 GBP'000 GBP'000 % Years
Sterling 138,524 123,610 14,914 12.0 24
As the 3.607% index linked secured bonds are partially linked
with the Retail Price Index, the instrument has been categorised as
floating rate debt in the above table. The underlying principal of
the bonds is index linked and the 3.607% fixed interest element of
the instrument is also index linked. Total liabilities shown above
comprise the gross amount of the bonds in issue and the
subordinated debt.
14 PROVISIONS FOR LIABILITIES
Deferred
Tax Life cycle Total
GBP'000 GBP'000 GBP'000
Provision at start of year 9,662 2,872 12,534
Amount provided for in year 819 3,746 4,565
Paid in the year - (2,632) (2,632)
Provision at end of year 10,481 3,986 14,467
It is anticipated that the life cycle provision will be utilised
within one year.
The Deferred Tax balance is analysed as follows:
2010 2009
GBP'000 GBP'000
Capitalised interest 7,502 8,070
Capital allowances 12,831 11,700
Short lease premium relief 486 446
Losses carried forward (10,338) (10,554)
Provision for deferred tax 10,481 9,662
15 FINANCIAL INSTRUMENTS
All of the company's financial liabilities are measured at
amortised cost and all of the company's financial assets are
classified as loans and receivables.
Financial Assets
The Company has one long term financial asset being the finance
debtor (see note 10). This asset yields interest at a fixed rate of
7% per annum over the term of the lease, of which 23 years of the
primary period are remaining.
Financial Risk Management Policies and Objectives
The Company's principal financial instruments comprise short
term cash deposits, index linked bonds and a subordinated loan. The
main purpose of these financial instruments is to ensure, via the
terms of the financial instruments, that the profile of the debt
service costs is tailored to match expected revenues arising from
the Concession Agreement.
The Company does not undertake financial instrument transactions
which are speculative or unrelated to the Company's trading
activities. Board approval is required for the use of any new
financial instrument, and the Company's ability to do so is
restricted by covenants in its existing funding agreements.
Exposure to liquidity, credit and interest rate risks are in the
normal course of the Company's business.
Liquidity Risk
Repayments of the index linked bonds and the subordinated loan
are tailored to match expected revenue receivable under the terms
of the Concession Agreement, so ensuring sufficient funds are
available when repayments are due.
Credit Risk
Although the Trust is the only client of Endeavour SCH PLC, the
Directors are satisfied that the Trust will be able to fulfil their
collateral obligations under the Concession Agreement that are in
turn underwritten by the Secretary of State for Health. As at the
year end no amounts were past their due date. Cash and bank
balances are held with financial institutions.
Interest Rate Risk
In respect of income-earning financial assets and
interest-bearing financial liabilities, the following table
indicates their effective interest rates at the balance sheet date
and the period in which they mature:
Effective 1 Year 1-2 2-5
Interest Total or Less Years Years 5+ Years 5+ Years
2010 Rate GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash at
bank 0.29% 17,248 17,248 - - - -
Finance
debtor 7.0% 143,068 2,879 5,959 9,903 124,327 129,407
Unsecured
subordinated
loan 12.0% (14,914) - - - (14,914) (14,914)
Guaranteed
secured
bonds 3.6% (120,257) (5,363) (5,805) (16,347) (92,742) (93,793)
25,145 14,764 154 (6,444) 16,671 20,700
15 FINANCIAL INSTRUMENTS (Continued)
Effective 1 Year 1-2 2-5
Interest Total or Less Years Years 5+ Years
2009 Rate GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank 0.29% 20,278 20,278 - - -
Finance
debtor 7.0% 143,925 2,514 2,697 9,307 129,407
Unsecured
subordinated
loan 12.0% (14,914) - - - (14,914)
Guaranteed
secured
bonds 3.6% (123,610) (8,388) (5,363) (17,218) (92,641)
25,679 14,404 (2,666) (7,911) 21,852
Fair Values
The comparison of book and fair values of the Group's financial
instruments at 31 December 2010 and 2009 is set out below. Where
available, market values have been used to determine fair values.
Where market values are not available, fair values have been
calculated by discounting cash flows at prevailing interest rates.
The disclosures below exclude short-term debtors and creditors
where there is not considered to be a material difference between
fair value and the carrying value.
31.12.10 31.12.10 31.12.09 31.12.09
Book Fair Book Fair
Value value Value Value
GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank 17,248 17,248 20,278 20,278
Finance Debtor 143,068 169,572 143,925 168,108
Subordinated
Loan Stock (14,914) (14,914) (14,914) (14,914)
Guaranteed
secured
bonds (120,257) (144,203) (123,610) (126,454)
25,145 27,703 25,679 47,018
Estimation of Fair Values
The following summarises the major methods and assumptions used
in estimating the fair values of financial instruments reflected in
the table.
Fair value of the finance debtor is calculated by discounting
future cash flows at an appropriate discount rate. The discount
rate has been calculated by reference to the long term Gilt Market
Yields published by the Debt Management Office. A further 1% has
been added to these yields to take account of the slightly higher
risk profile that the finance debtor has compared to Government
Gilts.
The discount rates that have been applied to the finance debtor
at 31 December 2009 and 31 December 2010 are 5.33% and 5.34%
respectively.
The fair value of the subordinated loan stock is not believed to
be materially different to the carrying value of the liability.
The fair value of the index linked secured guaranteed bonds is
the quoted price of the bonds.
15 FINANCIAL INSTRUMENTS (Continued)
Sensitivity Analysis
The majority of the Company's assets and liabilities are fixed
rate. The Company's bank balances are subject to floating interest
rates and a movement of plus or minus 1% in interest rates would
have an impact of approximately GBP200,000 on interest
receivable.
The Company's bond creditor is index linked. A movement of plus
or minus 1% on the RPI would have an impact of approximately
GBP1,560,000 on the indexation charge for the year. This risk is
mitigated by the fact that the Company's contractual revenue
streams are also index linked.
16 SHARE CAPITAL
31.12.10 31.12.09
GBP'000 GBP'000
Allotted, Called Up and Fully Paid
50,000 Ordinary Shares of GBP1 50 50
17 CAPITAL MANAGEMENT
The Company's objectives when managing capital are:
-- To safeguard the entity's ability to continue as a going
concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders; and
-- To provide an adequate return to shareholders by minimising
any potential performance deductions under the Concession
Agreement
The Company's debt to capital ratio over the life of the project
has been set in advance by the Concession Agreement and management
cannot vary the terms of this agreement without share and bond
holder approval.
18 RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
31.12.10 31.12.09
GBP'000 GBP'000
At 1 January 2010 11,901 8,238
Profit for the financial year after
taxation 3,466 7,224
Dividend (5,875) (3,561)
Net (decrease in) / addition to
Shareholders' Funds (2,409) 3,663
At 31 December 2010 9,492 11,901
19 CASH FLOW STATEMENT
a) Analysis of Net Debt
Other
Non
At Cash Cash At
01.01.10 Flow Changes 31.12.10
GBP'000 GBP'000 GBP'000 GBP'000
Cash at Bank 20,278 (3,030) - 17,248
Secured 3.607% Index
Linked Bonds 2031 (120,264) 8,389 (5,372) (117,247)
Subordinated
Debt (14,914) - - (14,914)
(114,900) 5,359 (5,372) (114,913)
b) Reconciliation of Net Cash Flow to Movement in Net Debt
31.12.10 31.12.09
Cash Flow Cash Flow
GBP'000 GBP'000
(Decrease) / Increase in Cash in
the Period (3,030) 643
Cash Outflow from Redemption of
Bond 8,389 8,898
Change in Net Debt Resulting from
Cash Flows 5,359 9,541
Changes in Net Debt Resulting
from Non Cash Transactions (5,372) 630
Movement in Net Debt in the
Period (13) 10,171
Other non-cash changes comprise provision for Bond indexation
GBP5,035,600 (2009 (GBP807,000)) and amortisation of Bond issue
costs GBP336,400 (2009: GBP177,000).
20 ULTIMATE HOLDING COMPANY AND CONTROLLING PARTY
The immediate holding Company is Endeavour SCH Holdings Limited,
a Company registered in England and Wales, and the ultimate
controlling party is Innisfree Nominees Limited. Copies of the
Group accounts are available from Companies House, Crown Way,
Cardiff CF14 3UZ.
21 RELATED PARTY TRANSACTIONS
The Company's parent Company is Endeavour SCH Holdings Limited
which is owned jointly by Innisfree M&G PPP LP, a UK Limited
Partnership acting through its nominee Innisfree Nominees Limited
and Semperian PPP Investment Partners N(o) 2 Limited.
Under the terms of Shareholder and Management Agreements,
Innisfree Nominees Limited and Semperian PPP Investment Partners
N(o) 2 Limited provide the Company with its Directors. The value of
fees charged in the year was GBP25,000 (2009: GBP35,000).
Innisfree Nominees Limited and Semperian PPP Investment Partners
N(o) 2 Limited are parties to an Equity Subscription Agreement,
details of which are given in note 13 of the financial
statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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