Registration number: 04698798
Connect
M77/GSO PLC
Annual
Report and Financial Statements
for the
Year Ended 31 March 2024
Please see signed version of this document at
following link
http://www.rns-pdf.londonstockexchange.com/rns/6771Y_1-2024-7-31.pdf
Connect M77/GSO
PLC
Contents
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Strategic Report
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1 to
4
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Directors' Report
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5 to
6
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Statement of Directors'
Responsibilities
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7
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Independent Auditor's
Report
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8 to
12
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Profit and Loss Account
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13
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Balance Sheet
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14
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Statement of Changes in
Equity
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15
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Notes to the Financial
Statements
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16 to
27
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Connect M77/GSO
PLC
Strategic Report for the Year
Ended 31 March 2024
The Directors present their
strategic report for the year ended 31 March 2024.
Principal activity
The Company is incorporated in Great
Britain, registered in England and Wales and domiciled in the
United Kingdom.
On 7 May 2003 Connect M77/GSO plc signed a contract with East
Renfrewshire Council (the "Client") (on behalf of the Scottish
Government for the M77 and South Lanarkshire Council and East
Renfrewshire Council for the Glasgow Southern Orbital (GSO)) to
design, build, finance and operate the M77 from Fenwick to
Malletsheugh and the GSO from Malletsheugh to Philipshill, East
Kilbride and sections of the A726 and to maintain these roads under
a licence over a 32 year period as well as modify certain sections
of the A77 (the "Concession Agreement"). In accordance with the
Concession Agreement the Company is responsible for operating the
roads together with carrying out all of the routine and major life
cycle maintenance for the life of the concession.
The new road sections were opened to the public in April 2005 and
the final completion certificate was issued in September 2005.
There have been no changes to the Company's activities in the year
under review and none are currently contemplated.
Review of business
The results for the year are set out
on page 13. The profit for the year before taxation was £1,978k
(2023: £1,357k) and the net liabilities position as at 31 March
2024 was £26,250k (2023: £27,734k) for the Company.
The Directors expect the Company to
continue its operations for the foreseeable future and the
Directors are not aware, at the date of this report, of any major
changes in the Company's activities in the next year.
Key
performance indicators
As part of the stewardship of the
project the Directors regularly consider Board reports related to
the performance of the Company and the information and Key
Performance Indicators ("KPI's") contained therein. These include,
amongst other things, variance against budget in the financial
statements and forward cash flow forecasting and other qualitative
and quantitative indicators of performance that, as a whole,
provide the basis for the management of the Company.
The Company has set specific
business objectives, which are monitored using a number of KPI's.
The relevant KPI's for this report are detailed below.
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2024
£ 000
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2023
£ 000
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Turnover
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3,514
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3,238
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Profit after taxation
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1,484
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1,122
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Net liabilities
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(26,250)
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(27,734)
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Connect M77/GSO
PLC
Strategic Report for the Year
Ended 31 March 2024 (continued)
Key
performance indicators (continued)
The Company has a net liability
position at the year end of £26,250k (2023: £27,734k). This is
primarily due to rolled up subordinated debt interest charges due
to the shareholders as the Company has not been permitted to make
any subordinated interest payments for an extended period. In order
to manage the compounding impact of the subordinated debt interest
roll up the shareholders have waived their rights to receive
interest for the year to 31 March 2024.
Despite the Company showing net
liabilities, the Company's projections, taking account of
reasonably possible counterparty performance, show that the Company
expects to be able to continue to operate for the foreseeable
future. Accordingly, the Directors continue to adopt the going
concern basis in preparing the annual report and financial
statements.
Principal risks and uncertainties
The Company recognises that
effective risk management is fundamental to achieving its business
objectives in order to meet its commitments in fulfilling the
Private Finance Initiative ("PFI") contract and in delivering a
safe and efficient service. Risk management contributes to the
success of the business by identifying opportunities and
anticipating risks in order to improve business performance and
fulfil our contractual obligations. The contract with East
Renfrewshire Council is 100% availability-based and as such, there
is no demand risk.
Credit and cash flow risk
The relevant financial risks to the
Company are credit and cash flow risks, which arise from its
Client. The credit and cash flow risks are not considered
significant as the client is a government organisation.
Interest rate risk
The financial risk management
objective of the Company is to ensure that financial risks are
mitigated by the use of financial instruments where they cannot be
addressed by means of contractual provisions. There are no
derivatives, risk is mitigated through a fixed rate loan
instrument. Financial instruments are not used for speculative
purposes.
Liquidity risk
The Company's liquidity risk is
principally managed through financing the Company by means of
long-term borrowings, with an amortisation profile that matches the
expected availability of funds from the Company's operating
activities. In addition, the Company maintains reserve bank
accounts to provide short-term liquidity against future debt
service and other expenditure requirements.
Contractual relationships
The Company operates within a
contractual relationship with its Client. A significant impairment
of this relationship could have a direct and detrimental effect on
the Company's results and could ultimately result in termination of
the concession.
To manage this risk the Company has
regular meetings with the Client including discussions on
performance, project progress, future plans and customer
requirements.
The Directors do not believe that
the Company is exposed to any significant Financial Risk. The
Company's principal activity as detailed above is low risk as all
relationships with the customer, funders and sub-contractors within
the Company in which it sits are determined by the terms of the
respective contracts.
Economic Uncertainty
The Directors have considered the
consequences to the Company of the current economic conditions,
including the high rate of inflation, increasing energy costs and
the impact of the war in Ukraine. As at the date of signing this
report, this has not had a significant impact on the Company, and
it is not currently anticipated that this will have a significant
impact in the future. This is primarily due to the contractual
nature of most of the Company's cash flows, including those which
cover financing, which ensures that any inflationary changes to
expenditure will be largely offset by equivalent changes to the
Company's revenue.
Connect M77/GSO
PLC
Strategic Report for the Year
Ended 31 March 2024 (continued)
Section 172 Companies Act 2006 Statement
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:
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The Company's shareholders, bondholders and credit
providers
Principal considerations of the board are to ensure that the
Company is meeting shareholder, credit provider and bondholder
expectations regarding its ability to meet its financing
obligations. These are discussed at all project board meetings,
which are held regularly throughout the year. The board regularly
discusses the obligations under the financing contracts, and how to
ensure these are fulfilled. In addition, regular meetings are held
with the funders, and attended by Directors, to keep them updated
on matters as required.
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Throughout the year the board has
given 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 regard to these matters when performing
their duties:
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a)
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the likely consequences of any decision in the long
term
The communication and reporting provided ensure that the board is
fully informed and able to make appropriate decisions.
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b)
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the interests of the Company's
employees,
The Company has no employees. The Company does, however, pay due
regard to the interests and safety of those who perform services on
its behalf.
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c)
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the need to foster the Company's business relationships with
suppliers, customers and others
The Company has regular meetings with the Client, including
discussions on performance, project processes, future plans and
customer requirements. The Company ensures that regular
communication is maintained between the parties to ensure that all
obligations are met.
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d)
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the impact of the Company's operations on the community and
the environment
The Company is committed to minimising environmental disruption
from its activities.
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e)
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the desirability of the Company maintaining a reputation for
high standards of business conduct
The Company is committed in its day to day activities and dealings
with all parties to uphold the highest standard of business conduct
and integrity.
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f)
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the need to act fairly as between members of the
Company
The members of the Company are represented at board meetings by
their appointed directors. 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 regard to it.
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The Directors are cognisant of their
duty under Section 172 in their deliberation as a board on all
matters. Decisions made by the board consider the interest 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.
Connect M77/GSO
PLC
Strategic Report for the Year
Ended 31 March 2024 (continued)
Future developments
The Directors expect the general
level of activity to remain stable in the forthcoming year. There
have been no other changes to the Company's activities in the year
under review and no others are currently contemplated.
Approved by the Board on
........................................ and signed on its behalf
by:
.........................................
M J Edwards
Director
Q14 Quorum Business Park
Benton Lane
Newcastle Upon Tyne
NE12 8BU
Connect M77/GSO
PLC
Directors' Report for the
Year Ended 31 March 2024
The Directors present their annual
report together with the audited financial statements for the year
ended 31 March 2024.
The following information has been
disclosed in the Strategic Report:
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Principal activities and business
review
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Key performance
indicators
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Principal risks and
uncertainties
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Indication of likely future
developments in the business
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Going concern
The Directors do not expect any
significant change to the Company's activities to occur in the
following financial year.
After making enquiries, as further elaborated in Note 1 of the
financial statements, the Directors have a reasonable expectation
that the Company has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to
adopt the going concern basis in preparing the financial
statements.
Results and dividends
The audited financial statements for
the year ended 31 March 2024 are set out on pages 13 to 27. The
profit for the year after tax was £1,484k (2023:
£1,122k).
The Directors declared and paid
dividends of £Nil (2023: £Nil). The Directors expect the Company to
continue its operations for the foreseeable future.
Directors of the Company
The Directors who held office during
the year were as follows:
J C Bond (appointed 25 March
2024)
M J Edwards
M P Mageean
A M Mughal
Disclosure of information to the auditor
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 steps that they ought to have taken to make himself/herself
aware of any relevant audit information and to establish that the
Company's Auditor is aware of that information.
Connect M77/GSO
PLC
Directors' Report for the
Year Ended 31 March 2024 (continued)
Auditor
Pursuant to Section 487 of the
Companies Act 2006, the auditor will be deemed to be reappointed
and KPMG LLP will therefore continue in office.
Approved by the Board on
........................................ and signed on its behalf
by:
.........................................
M J Edwards
Director
Q14 Quorum Business Park
Benton Lane
Newcastle Upon Tyne
NE12 8BU
Connect M77/GSO
PLC
Statement of Directors'
Responsibilities in respect of the Annual Report and the Financial
Statements
The Directors are responsible for
preparing the Annual Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors
to prepare financial statements for each financial year. Under that
law they have elected to prepare the financial statements in
accordance with UK Accounting Standards and applicable law (UK
Generally Accepted Accounting Practice), including FRS 102
The Financial Reporting Standard
applicable in the UK and Republic of Ireland.
Under company law the Directors must
not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
Company and of the profit or loss for that period. In preparing
these financial statements, the Directors are required
to:
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select suitable accounting policies
and apply them consistently;
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make judgements and estimates that
are reasonable and prudent;
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state whether applicable UK
Accounting Standards have been followed, subject to any material
departures disclosed and explained in the financial
statements;
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assess the Company's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern; and
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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.
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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 responsible for such internal control
as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error, and have general responsibility for
taking such steps as are reasonably open to them to safeguard the
assets of the Company and to prevent and detect fraud and other
irregularities.
Under applicable law and
regulations, the directors are also responsible for preparing a
Strategic Report, and Directors' Report that complies with that law
and those regulations.
Independent Auditor's Report
to the Members of Connect M77/GSO PLC
1.
Our opinion is unmodified
We have audited the financial
statements of Connect M77/GSO PLC (the 'Company') for the year
ended 31 March 2024, which comprise the Profit and Loss Account,
the Balance Sheet, the Statement of Changes in Equity, and related
notes, including the accounting policies in note 1.
In our opinion the financial
statements:
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give a true and fair view of the
state of the Company's affairs as at 31 March 2024 and of its
result for the year then ended;
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have been properly prepared in
accordance with UK accounting standards, including FRS 102
The Financial Reporting Standard
applicable in the UK and Republic of Ireland; and
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have been prepared in accordance
with the requirements of the Companies Act 2006.
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Basis for
opinion
We conducted our audit in accordance
with International Standards on Auditing (UK) ("ISAs (UK)") and
applicable law. Our responsibilities are described below. We
believe that the audit evidence we have obtained is a sufficient
and appropriate basis for our opinion. Our audit opinion is
consistent with our report to the audit committee.
We were first appointed as auditor
by the directors on 17 October 2016. The period of total
uninterrupted engagement is for the 8 financial years ended 31
March 2024. We have fulfilled our ethical responsibilities under,
and we remain independent of the Company in accordance with, UK
ethical requirements including the FRC Ethical Standard as applied
to listed public interest entities. No non-audit services
prohibited by that standard were provided.
2.
Key audit matters: our assessment of risks of material
misstatement
Key audit matters are those matters
that, in our professional judgement, were of most significance in
the audit of the financial statements and include the most
significant assessed risks of material misstatement (whether or not
due to fraud) identified by us, including those which had the
greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement
team. We summarise below the key audit matters (unchanged from
2020), in decreasing order of audit significance, in arriving at
our audit opinion above, together with our key audit procedures to
address those matters and, as required for public interest
entities, our results from those procedures. These matters were
addressed, and our results are based on procedures undertaken, in
the context of, and solely for the purpose of, our audit of the
financial statements as a whole, and in forming our opinion
thereon, and consequently are incidental to that opinion, and we do
not provide a separate opinion on these matters. In arriving at our
audit opinion above, the key audit matters, in decreasing order of
audit significance, were as follows:
Going concern
Risk vs 2023: ◄►
Refer to page 17 (Accounting
policy).
The risk
Disclosure
Quality
The financial statements explain how
the Board has formed a judgement that it is appropriate to adopt
the going concern basis of preparation for the Company.
The judgement is based on an
evaluation of the inherent risks to the Company's business model
and how those risks might affect the Company's financial resources
or ability to continue operations over a period of at least 12
months from the date of the financial statements.
The risks most likely to adversely
affect the Company's available financial resources over this period
is the impact of economic uncertainty on the contract performance,
subcontractor failure and compliance with borrowing
covenants.
Independent Auditor's Report
to the Members of Connect M77/GSO PLC (continued)
Our
response
We performed the tests below rather
than seeking to rely on any of the Company's controls because the
nature of the balance is such that we would expect to obtain audit
evidence primarily through the detailed procedures
described.
Our procedures included:
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Our
sector experience: We critically
assessed the Directors' going concern assessment, including the
reasonableness of the key assumptions used in cash flow forecasts
and the level of downside sensitivities applied using our knowledge
of the industry and current economy.
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Evaluating directors' intent: We evaluated the achievability of the actions the Directors
consider they would take to improve the position should the risks
materialise.
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Assessing transparency: We
assessed the accuracy and completeness of the matters covered in
the going concern disclosure.
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Our results
We found the going concern
disclosure without any material uncertainty to be acceptable (2021
result acceptable).
3.
Our application of materiality and an overview of the scope of our
audit
Materiality for the financial
statements as a whole was set at £1,200,000 (2023: £1,300,000)
determined with reference to a benchmark of total assets, of which
it represents 1% (2023: 1%).
We performed the tests above rather
than seeking to rely on any of the company's controls because the
nature of the balance is such that we would expect to obtain audit
evidence primarily through the detailed procedures
described.
In line with our audit methodology,
our procedures on individual account balances and disclosures were
performed to a lower threshold, performance materiality, so as to
reduce to an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material
amount across the financial statements as a whole.
Performance materiality was set at
75% (2023: 75%) of materiality for the financial statements as a
whole, which equates to £900,000 (2023: £975,000). We applied this
percentage in our determination of performance materiality because
we did not identify any factors indicated an elevated level of
risk.
We agreed to report to the Board of
Directors any corrected or uncorrected identified misstatements
exceeding £60,000 (2023: £65,000), in addition to other identified
misstatements that warranted reporting on qualitative
grounds.
Our audit of the Company was
undertaken to the materiality level set out above and was performed
remotely.
4.
Going concern
The Directors have prepared the
financial statements on the going concern basis as they do not
intend to liquidate the Company or to cease its operations, and as
they have concluded that the Company's financial position means
that this is realistic. They have also concluded that there are no
material uncertainties that could have cast significant doubt over
its ability to continue as a going concern for at least a year from
the date of approval of the financial statements ("the going
concern period").
An explanation of how we evaluated
management's assessment of going concern is set out in the related
key audit matter in section 2 of this report.
Independent Auditor's Report
to the Members of Connect M77/GSO PLC (continued)
Our conclusions based on this
work:
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we consider that the Directors' use
of the going concern basis of accounting in the preparation of the
financial statements is appropriate;
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we have not identified, and concur
with the Directors' assessment that there is not, a material
uncertainty related to events or conditions that, individually or
collectively, may cast significant doubt on the Company's ability
to continue as a going concern for the going concern period;
and
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we found the going concern
disclosure in note 1 to be acceptable.
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However, as we cannot predict all
future events or conditions and as subsequent events may result in
outcomes that are inconsistent with judgements that were reasonable
at the time they were made, the above conclusions are not a
guarantee that the Company will continue in operation.
5
Fraud and breaches of laws and regulations - ability to
detect
To identify risks of material
misstatement due to fraud (fraud risks) we assessed events or
conditions that could indicate an incentive or pressure to commit
fraud or provide an opportunity to commit fraud.
Our risk assessment procedures
included:
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Enquiring of Directors and
management as to the Company's high-level policies and procedures
to prevent and detect fraud, and the Company's channel for
whistleblowing, as well as whether they have knowledge of any
actual, suspected or alleged fraud;
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Reading Board meeting minutes;
and
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Using analytic procedures to
identify unusual or unexpected relationships.
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We communicated identified fraud
risks throughout the audit team and remained alert to any
indications of fraud throughout the audit.
As required by auditing standards,
we perform procedures to address the risk of management override of
controls, in particular the risk that management may be in a
position to make inappropriate accounting entries. On this audit we
do not believe there is a fraud risk related to revenue recognition
because revenue is a fixed mark up by way of an agreement with a
single customer.
We have not identified any
additional fraud risks.
We performed procedures
including:
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Identifying journal entries to test
based on criteria and comparing the identified entries to
supporting documentation. These included but not limited to entries
posted to unsual account combinations/seldom used accounts and
post-closing entries; and
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Assessing significant accounting
estimates for bias.
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Independent Auditor's Report
to the Members of Connect M77/GSO PLC (continued)
Identifying and responding to
risks of material misstatement due to non-compliance with laws and
regulations
We identified areas of laws and
regulations that could reasonably be expected to have a material
effect on the financial statements from our general commercial and
sector experience and through discussion with the directors and
other management (as required by auditing standards) and discussed
with the directors and other management the policies and procedures
regarding compliance with laws and regulations.
We communicated identified laws and
regulations throughout our team and remained alert to any
indications of non-compliance throughout the audit.
The potential effect of these laws
and regulations on the financial statements varies
considerably.
The Company is subject to laws and
regulations that directly affect the financial statements including
financial reporting legislation (including related companies
legislation) and taxation legislation and we assessed the extent of
compliance with these laws and regulations as part of our
procedures on the related financial statement items.
Secondly, the Company is subject to
many other laws and regulations where the consequences of
non-compliance could have a material effect on amounts or
disclosures in the financial statements, for instance through the
imposition of fines or litigation. We identified the following
areas as those most likely to have such an effect: health and
safety, data protection laws, anti-bribery, and certain aspects of
company legislation recognising the regulated nature of the
Company's activities. Auditing standards limit the required audit
procedures to identify non-compliance with these laws and
regulations to enquiry of the directors and inspection of
regulatory and legal correspondence, if any. Therefore if a breach
of operational regulations is not disclosed to use or evident from
relevant correspondence, an audit will not detect that
breach.
Context of the ability of the audit to detect fraud or
breaches of law or regulation
Owing to the inherent limitations of
an audit, there is an unavoidable risk that we may not have
detected some material misstatements in the Financial Statements,
even though we have properly planned and performed our audit in
accordance with auditing standards. For example, the further
removed non-compliance with laws and regulations is from the events
and transactions reflected in the Financial Statements, the less
likely the inherently limited procedures required by auditing
standards would identify it.
In addition, as with any audit,
there remained a higher risk of non-detection of fraud, as these
may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. Our audit
procedures are designed to detect material misstatement. We are not
responsible for preventing non-compliance or fraud and cannot be
expected to detect non-compliance with all laws and
regulations.
6.
We have nothing to report on the other information in the Annual
Report
The Directors are responsible for
the other information presented in the Annual Report together with
the financial statements. Our opinion on the financial statements
does not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated below, any
form of assurance conclusion thereon.
Our responsibility is to read the
other information and, in doing so, consider whether, based on our
financial statements audit work, the information therein is
materially misstated or inconsistent with the financial statements
or our audit knowledge. Based solely on that work we have not
identified material misstatements in the other
information.
Strategic Report and
Directors' Report
Based solely on our work on the
other information:
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we have not identified material
misstatements in the strategic report and the directors'
report;
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in our opinion the information given
in those reports for the financial year is consistent with the
financial statements; and
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in our opinion those reports have
been prepared in accordance with the Companies Act 2006.
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Independent Auditor's Report
to the Members of Connect M77/GSO PLC (continued)
7.
We have nothing to report on the other matters on which we are
required to report by exception
Under the Companies Act 2006, we are
required to report to you if, in our opinion:
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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
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the financial statements are not in
agreement with the accounting records and returns; or
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certain disclosures of Directors'
remuneration specified by law are not made; or
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we have not received all the
information and explanations we require for our audit.
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We have nothing to report in these
respects.
8.
Respective responsibilities
Directors' responsibilities
As explained more fully in their
statement set out on page 7, the Directors are responsible for: the
preparation of the financial statements including being satisfied
that they give a true and fair view; such internal control as they
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error; assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern; and using the going concern basis of accounting unless
they either intend to liquidate the Company or to cease operations,
or have no realistic alternative but to do so.
Auditor's
responsibilities
Our objectives are to obtain
reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or
error, and to issue our opinion in an auditor's report. Reasonable
assurance is a high level of assurance, but does not guarantee that
an audit conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can arise
from fraud, other irregularities or error and are considered
material if, individually or in aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the
basis of the financial statements.
A fuller description of our
responsibilities is provided on the FRC's website at
www.frc.org.uk/auditorsresponsibilities.
9.
The purpose of our audit work and to whom we owe our
responsibilities
This report is made solely to the
Company's members, as a body, in accordance with Chapter 3 of Part
16 of the Companies Act 2006. Our audit work has been undertaken so
that we might state to the Company's members those matters we are
required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company and the
Company's members, as a body, for our audit work, for this report,
or for the opinions we have formed.
......................................
Dan Gibson (Senior Statutory
Auditor)
For and on behalf of KPMG LLP,
Statutory Auditor
Chartered Accountants
Quayside House
110 Quayside
Newcastle Upon Tyne
NE1 3DX
Date:.............................
Connect M77/GSO
PLC
Profit and Loss Account for
the Year Ended 31 March 2024
|
|
Note
|
2024
£ 000
|
2023
£ 000
|
|
Turnover
|
6
|
3,514
|
3,238
|
|
Cost of sales
|
|
(3,102)
|
(2,804)
|
|
Gross profit
|
|
412
|
434
|
|
Administrative expenses
|
|
(258)
|
(184)
|
|
Operating profit
|
|
154
|
250
|
|
Interest receivable and similar
income
|
7
|
8,926
|
8,876
|
|
Interest payable and similar
expenses
|
8
|
(7,102)
|
(7,769)
|
|
Profit before tax
|
|
1,978
|
1,357
|
|
Taxation
|
9
|
(494)
|
(235)
|
|
Profit for the financial
year
|
|
1,484
|
1,122
|
The above results were derived from
continuing operations.
The Company has no recognised gains
or losses for the year other than the results above. Accordingly no
statement of comprehensive income is presented.
Connect M77/GSO
PLC
(Registration number:
04698798)
Balance Sheet as at 31 March
2024
|
|
Note
|
2024
£ 000
|
2023
£ 000
|
|
Non
current assets
|
|
|
|
|
Financial asset
|
12
|
98,152
|
104,829
|
|
Current assets
|
|
|
|
|
Debtors
|
13
|
282
|
213
|
|
Financial assets
|
12
|
5,033
|
4,179
|
|
Cash at bank and in hand
|
11
|
23,665
|
21,131
|
|
|
|
28,980
|
25,523
|
|
Creditors: Amounts falling due
within one year
|
14
|
(8,580)
|
(7,452)
|
|
Net
current assets
|
|
20,400
|
18,071
|
|
Total assets less current liabilities
|
|
118,552
|
122,900
|
|
Creditors: Amounts falling due
after more than one year
|
14
|
(143,010)
|
(148,727)
|
|
Deferred tax liabilities
|
10
|
(1,792)
|
(1,907)
|
|
Net liabilities
|
|
(26,250)
|
(27,734)
|
|
Capital and reserves
|
|
|
|
|
Called up share capital
|
17
|
50
|
50
|
|
Profit and loss account
|
|
(26,300)
|
(27,784)
|
|
Total equity
|
|
(26,250)
|
(27,734)
|
Approved and authorised by the Board
on ........................................ and signed on its
behalf by:
.........................................
M J Edwards
Director
Connect M77/GSO
PLC
Statement of Changes in
Equity for the Year Ended 31 March 2024
|
|
Called up share capital
£ 000
|
Profit and loss account
£ 000
|
Total
£ 000
|
|
At 1 April 2022
|
50
|
(28,906)
|
(28,856)
|
|
Total comprehensive
income
|
-
|
1,122
|
1,122
|
|
At 31 March 2023
|
50
|
(27,784)
|
(27,734)
|
|
|
Called up share capital
£ 000
|
Profit and loss account
£ 000
|
Total
£ 000
|
|
At 1 April 2023
|
50
|
(27,784)
|
(27,734)
|
|
Total comprehensive
income
|
-
|
1,484
|
1,484
|
|
At 31 March 2024
|
50
|
(26,300)
|
(26,250)
|
Connect M77/GSO
PLC
Notes to the Financial
Statements for the Year Ended 31 March 2024
Connect M77/GSO PLC (the "Company")
is a company limited by shares and incorporated, domiciled and
registered in England and Wales in the UK. The registered number is
04698798 and the registered address is Q14 Quorum Business Park,
Benton Lane, Newcastle Upon Tyne, NE12 8BU.
A summary of the principal
accounting policies of the Company, all of which have been applied
consistently throughout the current and preceding year, is set out
below.
Basis of preparation
These financial statements were
prepared in accordance with Financial Reporting Standard 102 The
Financial Reporting Standard applicable in the UK and Republic of
Ireland ("FRS 102") and the Companies Act 2006. The presentation
currency of these financial statements is sterling. All amounts in
the financial statements have been rounded to the nearest £1,000,
unless otherwise stated.
The Company's immediate parent
undertaking, Connect M77/GSO Holdings Limited, includes the Company
in its consolidated financial statements. The consolidated
financial statements of Connect M77/GSO Holdings Limited are
available to the public and may be obtained from the address in
note 19.
In these financial statements, the
Company is considered to be a qualifying entity (for the purposes
of this FRS) and has applied the exemptions available under FRS 102
in respect of the following disclosures:
|
•
|
Cash Flow Statement and related
notes; and
|
|
•
|
Key Management Personnel
compensation.
|
As the consolidated financial
statements of Connect M77/GSO Holdings Limited include the
equivalent disclosures, the Company has also taken the exemptions
under FRS 102 available in respect of the following
disclosures:
|
•
|
Certain disclosures required by FRS
102.26 Share Based Payments; and
|
|
•
|
Certain 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 of the Companies Act 2006.
|
Judgements made by the Directors, in
the application of these accounting policies that have significant
effect on the financial statements and estimates with a significant
risk of material adjustment in the next year are discussed in note
2.
Measurement convention
The financial statements are
prepared on the historical cost basis, except that financial
instruments classified as fair value through profit or loss are
stated at their fair value.
Connect M77/GSO
PLC
Notes to the Financial
Statements for the Year Ended 31 March 2024
(continued)
|
1
|
Accounting policies (continued)
|
Going concern
The Company's business activities,
together with the factors likely to affect its future development
and position, are set out in the Strategic Report and Directors'
Report.
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 for the period to September 2025 which indicate
that, taking account of severe but plausible downside scenarios,
the Company will have sufficient funds to meet its liabilities as
they fall due for a period of at least 12 months from the date of
approval of the financial statements. Those forecasts are dependent
on the underlying customer continuing to meet its obligations under
the Concession Agreement which are underwritten by The Cabinet
Ministers.
The Company operating cash inflows
are largely dependent on unitary charge receipts receivable from
East Renfrewshire Council. The Directors have no reason to believe
these amounts will not continue to be received but, even in a
severe but plausible downside scenario where there are delays in
the receipt of the unitary charge receipts, the Company could
continue to meet its liabilities as they fall due through its
available cash balances. The contract with East Renfrewshire
Council is 100% availability-based and as such, there is no demand
risk.
The Directors believe the Company
has sufficient funding in place and expect the Company to be in
compliance with its debt covenants even in severe but plausible
downside scenarios.
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 the operational phase, revenue is
recognised by allocating a proportion of total unitary income
receivable over the life of the project to service costs by means
of a deemed constant rate of return on these costs. Revenue is
recognised by applying a 5% mark-up on the operational costs,
representing the fair value of operational services.
Finance costs
Finance costs in relation to the
fixed rate senior secured bonds and the secured loan stock are
recognised using the effective interest rate method under FRS 102
whereby expected interest over the life of the project is spread
and recognised in each period.
Connect M77/GSO
PLC
Notes to the Financial
Statements for the Year Ended 31 March 2024
(continued)
|
1
|
Accounting policies (continued)
|
Tax
The tax expense for the period
comprises current and deferred tax. Tax is recognised in profit or
loss, except that a change attributable to an item of income or
expense recognised as other comprehensive income is also recognised
directly in other comprehensive income.
Current tax is provided at amounts
expected to be paid (or recovered) using the tax rates and laws
that have been enacted or substantively enacted by the balance
sheet date. The tax currently payable is based on taxable
profit
for the year. Taxable profit differs from net profit as reported in
the income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible.
Deferred tax is the tax expected to
be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability
method.
Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary
difference arises from the initial recognition of goodwill or from
the initial recognition (other than in a business combination) of
other assets and liabilities in a transaction that affects neither
the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised based on tax laws and rates that have been enacted or
substantively enacted at the balance
sheet date.
Connect M77/GSO
PLC
Notes to the Financial
Statements for the Year Ended 31 March 2024
(continued)
|
1
|
Accounting policies (continued)
|
Financial instruments
Classification
The Company accounts for the project
as a service concession arrangement. The Company entered into a
Concession Agreement with the Client to design, build, finance and
operate the M77 from Fenwick to Malletsheugh and the GSO from
Malletsheugh to Philipshill, East Kilbride and sections of the A726
and to maintain these roads under a license over a 32 year period.
The Company is responsible for operating the roads together with
carrying out all of the routine and major lifecycle maintenance for
the life of the concession. As per the terms of the Concession
Agreement, the Client pays the project a monthly unitary charge.
There is no demand risk within this arrangement and therefore the
Directors have used their judgement to conclude that the most
appropriate accounting basis for the concession is to record the
contract as a financial asset.
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, reduced by allowances for
estimated irrecoverable amounts and expected credit losses in the
case of trade debtors.
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.
Term loans are initially stated at
the amount of the net proceeds after deduction of related issue
costs. The carrying amount is increased by the finance cost in
respect of the accounting period and reduced by payments made in
the period.
Secured subordinated debt is
initially stated at the amount of the net proceeds after deduction
of related issue costs. The carrying amount is increased by the
finance cost in respect of the accounting period and reduced by
payments made in that period.
Investments realisable within one
year held by the Company represent amounts held on deposit with a
financial institution which are not available for withdrawal
without penalty in under 24 hours. Investments realisable within
one year are stated at amortised cost with the interest receivable
being recognised at a constant rate over the life of the
investment.
Cash and cash equivalents comprise
cash balances and call deposits.
Impairment
A financial asset not carried at
fair value through profit or loss is 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 through 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.
Connect M77/GSO
PLC
Notes to the Financial
Statements for the Year Ended 31 March 2024
(continued)
|
2
|
Critical accounting estimates and judgements
|
Judgements
In the application of the Company's
accounting policies, the Directors are required to make judgements,
estimates and assumptions about the carrying amount of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the
estimate is revised where the revision affects only that period, or
in the period of the revision and future periods where the revision
affects both current and future periods.
Key
sources of estimation uncertainty
The estimates and assumptions which
have a significant risk of causing a material adjustment to the
carrying amount of assets and liabilities are as
follows.
Service concession
arrangement
The Company accounts for the project
as a service concession arrangement. The Directors have used their
judgement in selecting the appropriate accounting basis for the
concession. The Directors have concluded that the most appropriate
accounting basis for the concession is to record the contract as a
financial asset, as there is no demand risk within the
arrangement.
The Directors use their judgement in
selecting the appropriate financial asset rate to be applied in
order to allocate the income received between revenue, and capital
repayment of and interest income on the financial asset; and also
the service margin of 5% that is used to recognise service revenue,
which is based on comparable contracts at the time of entering the
Concession Agreement.
The Directors have also used their
judgement in assessing the appropriateness of the future
maintenance costs that are included in the Company's forecasts. The
Directors will continue to monitor the condition of the assets and
undertake a regular review of maintenance spend.
The audit fee for the Company
amounted to £55k (2023: £50k).
|
4
|
Directors' remuneration
|
The Directors received no salary,
fees, or other benefits in the performance of their duties in
respect of the Company in the current or preceeding
year.
All staff costs are borne by Balfour
Beatty Investments Limited, which seconds its employees to the
Company and charges related service costs. The Company had no
employees during the current or prior year.
Connect M77/GSO
PLC
Notes to the Financial
Statements for the Year Ended 31 March 2024
(continued)
Turnover by origin and destination
from the Company's principal activity
|
|
2024
£ 000
|
2023
£ 000
|
|
UK
|
3,514
|
3,238
|
The Board of Directors is the
Company's chief operating decision-making body. The Board of
Directors has determined that there is only one operating segment -
Road Network.
|
7
|
Interest receivable and similar income
|
|
|
2024
£ 000
|
2023
£ 000
|
|
Interest income on financial
assets
|
8,009
|
8,508
|
|
Interest on bank accounts and
deposits
|
917
|
368
|
|
|
8,926
|
8,876
|
|
8
|
Interest payable and other expenses
|
|
|
2024
£ 000
|
2023
£ 000
|
|
Secured bond interest
|
6,139
|
6,469
|
|
Secured loan stock
interest
|
963
|
1,300
|
|
|
7,102
|
7,769
|
|
9
|
Taxation
|
|
|
|
| |
Tax charged/(credited) in the income
statement
|
|
2024
£ 000
|
2023
£ 000
|
|
Current taxation
|
|
|
|
UK corporation tax
|
609
|
331
|
|
Deferred taxation
|
|
|
|
Arising from origination and
reversal of timing differences
|
(115)
|
(73)
|
|
Arising from changes in tax rates
and laws
|
-
|
(23)
|
|
Total deferred taxation
|
(115)
|
(96)
|
|
Tax expense in the income
statement
|
494
|
235
|
Connect M77/GSO
PLC
Notes to the Financial
Statements for the Year Ended 31 March 2024
(continued)
The tax on profit before tax for the
year is the same as the standard rate of corporation tax in the UK
(2023 - lower than the standard rate of corporation tax in the UK)
of 25% (2023 - 19%).
The differences are reconciled
below:
|
|
2024
£ 000
|
2023
£ 000
|
|
Profit before tax
|
1,978
|
1,357
|
|
Corporation tax at standard
rate
|
494
|
258
|
|
Deferred tax credit relating to
changes in tax rates or laws
|
-
|
(23)
|
|
Total tax charge
|
494
|
235
|
Deferred tax is measured at a tax
rate of 25% in line with rates enacted by the Finance Act 2021
which was enacted on 24 May 2021.
|
10
|
Deferred tax liability
|
|
|
2024
£ 000
|
2023
£ 000
|
|
At 1 April
|
(1,907)
|
(2,003)
|
|
(Charged)/credited to the income
statement
|
115
|
96
|
|
At 31 March
|
(1,792)
|
(1,907)
|
|
|
|
| |
The deferred tax liability is a
timing difference relating to capitalised interest for which a
deduction was previously recognised. The timing difference is being
released in line with the release of the capitalised interest
element held within the financial asset.
|
11
|
Cash and cash equivalents
|
|
|
2024
£ 000
|
2023
£ 000
|
|
Cash at bank
|
23,665
|
21,131
|
|
|
|
| |
Cash at bank and in hand includes
£21,025k (2023: £18,184k) restricted from use in the business,
being held in the Company's reserve accounts under the terms of its
senior loan facility.
Connect M77/GSO
PLC
Notes to the Financial
Statements for the Year Ended 31 March 2024
(continued)
|
12
|
Financial asset
|
|
|
2024
£ 000
|
2023
£ 000
|
|
Balance brought forward
|
109,008
|
113,760
|
|
Service income received in the
year
|
(17,918)
|
(17,122)
|
|
Operating revenues
|
3,308
|
3,106
|
|
Lifecycle replacement
costs
|
778
|
756
|
|
Notional interest
|
8,009
|
8,508
|
|
Balance carried forward
|
103,185
|
109,008
|
|
|
|
| |
Financial asset
comprising:
|
|
2024
£ 000
|
2023
£ 000
|
|
Amounts falling due within one
year
|
5,033
|
4,179
|
|
Amounts falling due after more than
one year
|
98,152
|
104,829
|
|
|
103,185
|
109,008
|
|
13
|
Debtors
|
|
|
2024
£ 000
|
2023
£ 000
|
|
Prepayments and accrued
income
|
282
|
213
|
|
|
282
|
213
|
|
14
|
Creditors
|
|
|
2024
£ 000
|
2023
£ 000
|
|
Due
within one year
|
|
|
|
Fixed rate senior secured
bonds
|
6,856
|
6,184
|
|
Accruals and deferred
income
|
1,372
|
1,122
|
|
VAT payable
|
251
|
76
|
|
Corporate tax liability
|
101
|
70
|
|
|
8,580
|
7,452
|
|
Due
after one year
|
|
|
|
Fixed rate senior secured
bonds
|
94,236
|
100,916
|
|
Secured loan stock
|
14,865
|
14,865
|
|
Secured loan stock
interest
|
33,909
|
32,946
|
|
|
143,010
|
148,727
|
|
|
|
| |
Connect M77/GSO
PLC
Notes to the Financial
Statements for the Year Ended 31 March 2024
(continued)
Fixed rate guaranteed senior secured
bonds due 2034 of £152,429k were issued on 7 May 2003. The bonds
have been unconditionally and irrevocably guaranteed by Syncora
Guarantee (UK) Limited (formerly XL Capital Assurance (UK) Limited)
for payment of principal and interest.
Interest on the bonds is payable
semi-annually in arrears on 31 March and 30 September in each year
at a fixed rate of 5.404% per annum commencing on 30 September
2003.
Unless previously redeemed or
purchased and cancelled, the bonds will mature on 31 March 2034 and
are subject to redemption in part from, and including, 30 September
2006 in accordance with the amortisation schedule set out in the
bonds offering circular.
The secured loan stock bears
interest at 12.1% per annum and accrues from the date of final
completion, with the final instalment due in 2035, or as the
Company elects, but subject to certain restrictions in the
collateral deed. The secured loan stock issued by the Company is
held by the Company's immediate parent company. The Company's
immediate parent company has waived its right to receive interest
within 12 months for the years ended 31 March 2023 and 31 March
2024.
All borrowings contain either a
fixed or varying security interest over the assets of the Company,
as defined by an intercreditor agreement. The bonds have certain
covenants attached.
Fixed rate guaranteed senior secured
bonds are stated net of unamortised issue costs of £1,175k (2023:
£1,352k). The Company incurred total issue costs of £4,403k in
respect of the fixed rate bonds. These costs, together with the
interest expense, are allocated to the profit and loss account over
the term of the bonds. Interest is calculated using the effective
interest rate method.
The Company has committed borrowing
facilities available of £167,294k which have been fully drawn as at
31 March 2024 (2023: £167,294k).
Loans not wholly repayable within
five years:
|
|
2024
£ 000
|
2023
£ 000
|
|
Fixed rate guaranteed senior secured
bonds
|
102,268
|
108,452
|
|
Secured loan stock
|
14,865
|
14,865
|
|
|
117,133
|
123,317
|
Analysis of maturity of
debt:
|
|
2024
£ 000
|
2023
£ 000
|
|
Within one year or on
demand
|
6,856
|
6,184
|
|
Between one and two years
|
7,370
|
6,856
|
|
Between two and five
years
|
25,817
|
23,939
|
|
After five years
|
77,090
|
86,338
|
|
|
117,133
|
123,317
|
Connect M77/GSO
PLC
Notes to the Financial
Statements for the Year Ended 31 March 2024
(continued)
Capital risk management
The Company manages its capital to
ensure its ability to continue as a going concern, to meet the
requirements of its collateral deed and to maintain an optimal
capital structure to reduce the cost of capital. The capital
structure of the Company comprises equity attributable to equity
holders consisting of ordinary share capital and profit and loss
account and cash and cash equivalents and borrowings. The Company
has complied with capital requirements imposed by the collateral
deed throughout the year. There have been no changes in the
Company's management of capital from previous years.
The principal risks and
uncertainties faced are highlighted in the strategic report on page
2.
The Company has the following
financial instruments:
|
|
2024
£ 000
|
2023
£ 000
|
|
Due on demand or within one
year
|
12,462
|
12,147
|
|
Due within one to two
years
|
12,586
|
12,462
|
|
Due within two to five
years
|
38,810
|
38,294
|
|
Due after more than five
years
|
115,258
|
126,298
|
|
|
179,116
|
189,201
|
|
17
|
Share capital
|
|
|
|
| |
Allotted, called up and fully paid shares
|
|
2024
|
2023
|
|
|
|
No.
|
£
|
No.
|
£
|
|
Ordinary shares of £1
each
|
50,000
|
50,000
|
50,000
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
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.
The Company's other reserves are as
follows:
|
•
|
The profit and loss reserve
represents cumulative profits or losses, net of dividends
paid.
|
Connect M77/GSO
PLC
Notes to the Financial
Statements for the Year Ended 31 March 2024
(continued)
|
18
|
Related party transactions
|
Transactions during the year
|
|
2024
£ 000
|
|
Balfour Beatty Civil Engineering -
operation and maintenance
|
3,653
|
|
Balfour Beatty Investments - staff
secondment charges
|
173
|
|
|
3,826
|
|
|
2023
£ 000
|
|
Balfour Beatty Civil Engineering -
operation and maintenance
|
3,286
|
|
Balfour Beatty Investments - staff
secondment charges
|
339
|
|
|
3,625
|
Outstanding balances at the end of the year
|
|
2024
£ 000
|
|
Balfour Beatty Civil Engineering -
operation and maintenance
|
354
|
|
Balfour Beatty Investments - staff
secondment charges
|
38
|
|
|
392
|
|
|
2023
£ 000
|
|
Balfour Beatty Civil Engineering -
operation and maintenance
|
246
|
|
Balfour Beatty Investments - staff
secondment charges
|
27
|
|
|
273
|
All the above outstanding related
party balances were accrued at year end.
|
19
|
Parent and ultimate parent undertaking
|
The company's immediate parent is
Connect M77/GSO Holdings Limited, incorporated in the United
Kingdom and registered in England and Wales.
The ultimate parent is Balfour
Beatty plc and BIIF LP (acting by its manager, BIFM Investments
Ltd), incorporated in the United Kingdom and registered in England
and Wales.
The largest and smallest group in
which the results of Connect M77/GSO plc are consolidated is
Connect M77/GSO Holdings Limited, copies of whose financial
statements are available from Q14 Quorum Buisness Park, Benton
Lane, Newcastle Upon Tyne, NE12 8BU.
Connect M77/GSO
PLC
Notes to the Financial
Statements for the Year Ended 31 March 2024
(continued)
As at the date of the approval of
these accounts, there were no material post balance sheet events
arising after the reporting date.