TIDM94BD
RNS Number : 6788A
Incommunities Treasury PLC
30 September 2020
Company Registered Number 11678195
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lncommunities Treasury Plc
REPORT AND FINANCIAL STATEMENTS
For the year ended 31 March 2020
CONTENTS
Page Directors, Officers and Professional
Advisors....................................................................................................
1
Strategic
Report................................................................................................................................
2
Directors'
Report...............................................................................................................................
7
Independent Auditor's Report to the Members of lncommunities
Treasury Plc..................................... 11
Statement of Comprehensive
lncome...............................................................................................
16
Statement of Changes in
Equity.......................................................................................................
17
Statement of Financial
Position........................................................................................................
18
Notes to the Financial
Statements.....................................................................................................
19
DIRECTORS, OFFICERS AND PROFESSIONAL ADVISORS
BOARD OF DIRECTORS
J Ormondroyd (Chair) I Cornelius
J Lawrenuik (from 20.08.20)
G Robinson (Assistant Chief Executive Resources) M Walker (to
12.09.19)
SECRETARY
G Robinson (Assistant Chief Executive Resources)
EXECUTIVE MANAGEMENT TEAM
G L Howley - Group Chief Executive
A Perry - Assistant Chief Executive Asset Management A Reid -
Assistant Chief Executive Neighbourhoods
G Robinson - Assistant Chief Executive Resources
REGISTERED OFFICE
The Quays Victoria Street Shipley
West Yorkshire BD17 7BN
AUDITOR
BOO LLP
3 Hardman Street Spinningfields Manchester M33AT
SOLICITORS
In House Legal Team The Quays
Victoria Street Shipley
BD17 7BN
Trowers & Hamlins LLP 3 Bunhill Row
London EC1Y 8YZ
Devonshires LLP 30 Finsbury Circus London
EC2M 7DT
BANKERS
National Westminster Bank Plc The Bank of New York Mellon
1 Market Street London Branch
Bradford One Canada Square
BD1 1EG London
E14 5AL
Registered as a public limited company under the Companies Act
Number 11678195
REVIEW OF THE BUSINESS
lncommunities Treasury Plc (the 'Company') was formed on 14
November 2018, and is a wholly owned subsidiary of lncommunities
Group Limited (the 'Group Company'), its ultimate parent
undertaking. The Company operates as a funding vehicle for
lncommunities Group Limited and its subsidiaries (the 'Group').
On 21 March 2019, the Company issued a 30-year GBP250m own name
public issue dated senior secured bond (the 'Bond') at a coupon
rate of 3.25%. The initial offer to the market was for a principal
amount of
GBP200m of bonds (the 'Principal Amount', the 'Issued Bond')
with a principal amount of GBP50m of bonds retained for later issue
(the 'Retained Bond').
The Issued Bond was priced at 99.184% (the 'Bond Issue Price')
equivalent to a Discount on Issue of
GBP1.632m (0.816%). The net funds received were GBP198.368m
(GBP99.184 per GBP100 issued).
In arranging the Bond, the Company incurred Bond Issue Costs of
GBP2.218m, which were paid directly from the proceeds of the Bond
or by other Group entities. These latter costs were reimbursed by
the Company through intercompany accounts.
The Discount on Issue and the Bond Issue Costs are amortised
over the term of the Bond. Interest is payable by the Company to
the bondholders at a rate of 3.25% on the Principal Amount.
The Bond is secured by way of fixed charges over the housing
properties of lncommunities Limited ('lncommunities') (a fellow
subsidiary) in favour of Prudential Trustee Company Limited acting
as Security Trustee.
The Principal Amount is due for repayment on 21 March 2049.
Following the Bond issue, the Company provided Credit
--Facilities, equal to the amount of the Bond, to lncommunities and
Sadeh Lok Limited ('Sadeh Lok') (a fellow subsidiary) (the
'Borrowers'). The Issued Bond was allocated in the ratio 90:10
(lncommunities/Sadeh Lok) and the Retained Bond allocated in the
ratio 100:0 (lncommunities/Sadeh Lok). The Credit Facilities are
provided under formal Loan Agreements between the Company and the
Borrowers. These agreements are not listed.
On 21 March 2019, the Company made advances under the Credit
Facilities to the Borrowers from the Issued Bond of principal
amounts of GBP180m (lncommunities) and GBP20m (Sadeh Lok). Each
principal amount was advanced at a discount, equivalent to a 90:10
(lncommunities/Sadeh Lok) pro rata split of the Discount on Issue
of GBP1.632m, and after loan issue costs, equivalent to a 90:10
(lncommunities/Sadeh Lok) pro rata split of the Bond Issue Costs of
GBP2.218m.
The discount and loan issue costs applied to the principal
amounts are amortised over the period of the Credit Facilities,
which run until March 2049. Interest is receivable by the Company
from the Borrowers at a rate of 3.25% on the principal amounts of
the advances.
During the year, the Company charged a management fee to the
Borrowers of GBP35k (2019: GBPNil). The Company's profit for the
year is GBP2k (2019: GBPNil), and its reserves at the year end are
GBP2k (2019: GBPNil).
The Directors are satisfied with the results for the year and
expect future results to continue on a similar basis.
KEY PERFORMANCE INDICATORS
The Company is monitored against a defined operating model,
which requires the internal recharge of all interest payable and
administration costs, ensuring that Company at least breaks
even.
SECTION 172 STATEMENT
Section 172 of the Companies Act 2006 requires Directors to take
into consideration the interests of stakeholders and other matters
in their decision making. The Directors continue to have regard to
the interests of the Company's stakeholders, the impact of its
activities on the Group's employees, tenants, residents and the
community, the environment and the Group ' s reputation in the
housing sector, the region and the wider business environment, when
making decisions. In this context, acting in good faith and with
the best interests of the Group's employees, tenants, residents,
and wider stakeholders, the Directors approve strategic goals that
are most likely to promote the success of the Company and the Group
over the medium to long term. This is explained in the annual
report and engagement with stakeholders as summarised in the table,
as follows .
Table 1: Engagement with Stakeholders
Stakeholder Why we engage How engagement occurs
--------------------------------------
Group Board Members lncommunities Treasury Plc is The Group Board has the
a wholly owned subsidiary of authority to appoint Board
lncommunities Group Limited. Members and the Group
The Company exists to provide Chief Executive. The Group
the Group with access to the Board meets a minimum
debt capital markets, to provide of six times each year
a source of long term low cost to review business performance.
funding. Specific committees (Operations,
Audit and Risk, HR and
The Group Board provides scrutiny Governance), augmented
over the financial and operational with independent members
performance of the Group and selected for their technical
the development of policies. knowledge and expertise
The Group Board formulates the provide an additional
strategy and holds the executives layer of scrutiny and
to account for the delivery challenge.
of the short and medium term
objectives to deliver the mission
of Improving Lives 2040.
In short, the Group Board ensures
the financial obligations entered
into by the Company can be satisfied
through the financial performance
of the Group as a whole.
===================== ====================================== ==================================
Housing Association The Group's housing associations The Group's housing associations
Borrowers are the borrowers of the funds draw their Board members
raised by the Company and have from the Group Board and
pledged their housing assets have a majority of their
as security. members in common. As
such, they are better
The housing associations collect able to monitor the financial
tenants' rents, which is the and operational performance
primary source of the funds of the business through
used to meet the interest cost the board meetings.
of the borrowings, and maintain
the Group's housing stock to
ensure it is a safe and decent
place to live, ensuring the
necessary rental receipts are
generated .
The Housing Associations maintain
and invest in the housing assets
to ensure these meet the security
requirements.
===================== ====================================== ==================================
Funders and Investors The Company and the Group believe The Group provides interim
it is essential to develop and results on the London
maintain transparent arrangements Stock Exchange system
with its funders and investors. . In addition, the information
The funders and investors provide is uploaded onto the investor
the means for the Group's housing portal on the website
associations to continue to .
invest in its social housing
stock - to the benefit of its
residents.
-------------------------------------- ------------------------------------
Community and The Group Company is a commercial The Board members and
Executives maintain good
relationships with the
local authorities in which
the Group operates. This
has been particularly
important in supporting
the Bradford Metropolitan
District Council's response
to the Covid-19 pandemic.
The Board members, Executives
and leadership team provide
a wide range of support
to the sector and related
organisations through
both fundraising and as
board members of relevant
organisations.
------------------------------------
Charities parent of charitable social
housing registered provider
subsidiaries . All surpluses
made by the Group are used to
fund the investment in existing
social housing assets - or the
development or acquisition of
new homes . The Group also supports
local foodbanks , homelessness
charities and related causes.
----------------------- -------------------------------------- ------------------------------------
Environment The business has a responsibility The Group is committed
to ensure that it proactively to reducing waste generated
looks at ways in which it can by its operations. Work
minimise its carbon footprint, has been undertaken to
whilst ensuring that it delivers reduce waste and increase
the services required by our recycling . Automated
customers. The Group has made repair scheduling will
significant investments in its optimise travel routes
housing properties to reduce and minimise fuel usage.
energy costs and the impact
on the environment. Consideration is being
made of using electric
vehicles. The business
has invested in digital
connectivity and has significantly
increased home working,
and mobile and remote
working to reduce commuter
traffic. Video conferencing
has increased substantially
in light of the pandemic.
----------------------- -------------------------------------- ------------------------------------
The table below shows the key events and decisions made by the
Board, the stakeholders they impacted and the associated actions
taken by the Directors to engage with the relevant stakeholders.
Key events and decisions have been determined by assessing items
which are either material for the business or that have a
significant impact on one or many categories of stakeholders
Table 2: Key Events, Decisions, Actions and Impacts
Key Stakeholders affected Actions and impact
events/
decisions
------------------------------------------------------------- --------------------------------------------------------------
The
decision * The bond is a publicly traded financial instrument * The Group maintains an Investor Portal , which
to that is predominantly held by life insurance and provides information on the
launch pension
the
public Group's operations and
issue companies operating in the UK. results . The Group also
bond was The Group and the Company has provides semi-annual trading
made a responsibility to keep these statements, which are
during bondholders informed about the posted on the RNS .
2018/19, operations and operating results
and this of the Group, and to ensure * The Group and the Company operate in a prudent and
took that the Group and the Company financially responsible
place in operate in a manner that ensures
March interest due on the bond is
2019. The paid on time and in full to manner that ensures amounts
Group the bondholders. due to the bondholders
and the are met on t i me and
Company * The bond issue provided funding for the Group's in full.
are now housing associations in exchange for secured
actively property. The funds are being used to improve * Investment in Group housing assets i s made in
looking accordance
at
issuing housing provision and investment
part or which benefits tenants . The with the Asset Management
all of needs of tenants and customers Strategy, as approved
the are considered through the Operations by the Group Board . The
retained Comm i ttee and related processes investment takes account
bond - operated by the Group. of the needs of customers
during as determined through
2020/21. * Changes to Group borrowing levels have an implication the Operations Committee
for other lenders and investors in the Group. and direct market information
collected by the Group.
* The Group's approach to financing is developed in
consultation with professional
advisors, banks and investors
. Existing funding is
provided subject to maintaining
security arrangements
and meeting lenders' covenants.
These are reviewed by
the Group Board and reported
on in accordance with
the Group ' s Treasury
Management Policy.
----------- ------------------------------------------------------------- --------------------------------------------------------------
FINANCIAL RISK MANAGEMENT
The Board has full responsibility for assessing and managing
risk. The Company operates in accordance with the risk management
processes of the Group Company. These include the maintenance of a
risk management strategy and a risk map. The risk map is considered
regularly by the Board of Directors of the Group Company (the
'Group Board') and the Group's Audit and Risk Committee (the 'ARC')
to identify the key risks to the business.
The Company's operations expose it to a variety of financial
risks that include the effects of interest rate risk, liquidity
risk arid credit risk . The Group has in place a risk management
strategy and a treasury management policy that seeks to limit any
adverse financial impacts associated with the Company's operations
by actively managing its debt finance and related finance
costs.
Interest Rate Risk
The Company currently borrows funds on a fixed rate basis at
3.25% from the capital markets through its public issue bond. These
funds are on-lent to the Borrowers at the same fixed rate of
interest. This provides a natural hedge for the Company due;
firstly, to the fixed rate of interest on the Bond through to
maturity, secondly, the matching of interest rate terms on the
borrowing and on-lending, and thirdly, accounting for the Bond at
amortised cost, so that any movements in the fair value of the Bond
do not impact the Statement of Comprehensive Income
In view of the above, the Company does not bear any interest
rate risk, apart from the underlying credit risk of the Borrowers,
which is covered below. The Company does not undertake any hedging
activities and does not deal in derivatives.
The Borrowers have other debt on fixed and variable interest
rates from external providers, which are closely monitored to
ensure compliance with covenants. Close monitoring of market
movements in interest rates and an active approach towards treasury
management takes place within the Group to ensure interest rate
risk is properly managed.
Liquidity Risk
Liquidity risk is the risk that the Company might be unable to
meet its obligations . The Company lends the full amount of the
loans it has borrowed. Accordingly, the Company has assets to fully
offset its liabilities, and investment income to offset its
interest payable. Cash is monitored by each Group member to ensure
funds are available to meet ongoing commitments.
Credit risk
As at 31 March 2020, the Company has on-lent all of its
available funds to the Borrowers. Attached to these intercompany
borrowings is a financial guarantee by the Borrowers that is
secured by first legal mortgages over property assets with a value
in excess of the total borrowings .
The Company is dependent on the receipt of funds from the
Borrowers to meet its contractual obligations to the bondholders.
The credit risk is that the Borrowers fail to reimburse the
Company. The Board considers this credit risk to be low given that
the Borrowers have strong asset bases that consistently generate
operating surpluses. Additionally, the Borrowers are governed and
managed by an experienced Group Board and Executive Management
Team, and are overseen by a regulator that monitors the financial
viability of the business.
Foreign Currency Risk
The Company has no foreign currency transactions, and all of the
Company's borrowings, coupons payable, and investment income are
denominated in Sterling .
FUTURE DEVELOPMENTS
The Company has a retained bond of GBP50m. This is considered to
be sufficient to support the Group's future plans . The Group and
the Company are actively looking at issuing part or all of the
retained bond during 2020/21.
APPROVAL
The Strategic Report was approved by the Board on 20 August 2020
and signed on its behalf by:
The Board of Directors (the 'Board') is pleased to present its
report and audited financial statements for the year ended 31 March
2020 .
LEGAL STATUS
lncommunities Treasury Plc is a public limited company, limited
by shares and registered in England and Wales.
The Company's registered office is The Quays, Victoria Street,
Shipley, BD17 7BN.
GROUP STRUCTURE
The Company is a wholly owned subsidiary of lncommunities Group
Limited (the 'Group Company'). lncommunities Group Limited and its
subsidiaries (the 'Group') provide central and strategic services
to the Company including; treasury and financial management,
information technology, legal services, and governance.
The Company has no subsidiaries.
PRINCIPAL ACTIVITY
The Company operates as a funding vehicle for the Group.
RESULTS FOR THE YEAR
A review of the business is included in the Strategic Report and
the results for the year are set out in the financial
statements.
GOING CONCERN
The Company will continue its operations as a funding vehicle
for the Group and is aware that it is a requirement of the
agreements entered into by the Company with respect to the Bond
that it continues its existing relationship with the Group Company
and the Borrowers.
The Company is dependent on the receipt of funds from the
Borrowers to meet its contractual obligations to the bondholders.
Each of the Borrowers has a long-term business plan in place, which
demonstrates its ability to support its existing debt and meet its
obligations . These plans have been adjusted for the likely effects
of the Covid-19 pandemic. They have also been stress tested, with
particular emphasis placed on examining and evaluating the possible
effects of the pandemic. These evaluations found that the
Borrowers' long-term business plans were robust and that the
effects of the pandemic are likely to be relatively short-term and
should not affect the ability of the Borrowers to meet their
obligations . Accordingly, no impairment has been recognised in the
financial statements in respect of the advances made to the
Borrowers under the Credit Facilities.
On this basis, the Board has a reasonable expectation that the
Company has adequate resources to continue in operation for the
foreseeable future, being a period of twelve months from the date
on which the report and financial statements are signed. For this
reason, the Board continues to adopt the going concern basis in the
financial statements.
BOARD OF DIRECTORS, EXECUTIVE MANAGEMENT TEAM AND EMPLOYEES
The Directors and members of the Executive Management Team who
held office during the year and from the year-end to the date of
this report are set out on page 1.
During the year M Walker stepped down as a member of the Group
Board after serving his permitted nine-year term, and resigned as a
Director of the Company. At the year-end, the Board of Directors
comprises three members. An additional Director was appointed post
year-end. The Directors are either members of the Group Board or
members of the Executive Management Team.
The Directors and members of the Executive Management Team form
the key management personnel of the Company. The contracts of
employment of the members of the Executive Management Team are held
by the Group Company and their associated employment and pension
costs are absorbed by the Group Company.
Details of the Directors' remuneration and expenses, and
relevant details relating to the employment of the members of the
Executive Management Team are set out in the Group Company's
consolidated report and financial statements.
The Company has no employees.
DIRECTORS' RESPONSIBILITIES IN THE PREPARATION OF THE FINANCIAL
STATEMENTS
The Directors are responsible for preparing the Strategic
Report, the Directors' Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the financial statements in accordance with
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 those financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; 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.
Each of the Directors, whose names and functions are listed
under the Directors, Officers and Professional Advisors on page 1
confirm that, to the best of each person's knowledge:
-- the financial statements, prepared in accordance with United
Kingdom Generally Accepted Accounting Practice, give a true and
fair view of the assets, liabilities, financial position and result
of the Company; and
-- the Strategic Report contained in the report and financial
statements 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.
DIRECTORS' AND OFFICERS' INSURANCE
Through the Group Company, the Company maintains Directors' and
Officers' liability insurance for the Directors and the members of
the Executive Management Team.
ANNUAL GENERAL MEETING
The Annual General Meeting will take place on 17 September 2020
.
DISCLOSURE OF INFORMATION TO THE AUDITOR
The Directors who were in office on the date of approval of
these financial statements have confirmed , as far as they are
aware, that there is no relevant audit information of which the
Auditor is unaware. Each of the Directors has confirmed that they
have taken all of the steps that they ought to have taken as a
director in order to make themselves aware of any relevant audit
information, and to establish that it has been communicated to the
Auditor.
AUDITOR
During the year, the Group tendered its external audit function
and appointed BOO LLP as the Group's and the Company's statutory
auditor (the ' Auditor') on 19 December 2019.
APPROVAL
The Directors' Report was approved by the Board on 20 August
2020 and signed on its behalf by:
G Robinson Secretary
Opinion
We have audited the financial statements of lncommunities
Treasury PLC (the 'Company') for the year ended 31 March 2020,
which comprise the Statement of Comprehensive Income, the Statement
of Changes in Equity, the Statement of Financial Position, and the
notes to the financial statements, including a summary of
significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and
United Kingdom Accounting Standards, including Financial Reporting
Standard 102, the Financial Reporting Standard applicable in the UK
and Republic of Ireland (United Kingdom Generally Accepted
Accounting Practice).
In our opinion the financial statements:
-- give a true and fair view of the state of the Company's
affairs as at 31 March 2020 and of the Company's 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 .
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law . Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the Company
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you
where:
-- the Directors' use of the going concern basis of accounting
in the preparation of the financial statements is not appropriate;
or
-- the Directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the Company's ability to continue to adopt the going
concern basis of accounting for a period of at least twelve months
from the date when the financial statements are authorised for
issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, 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 . These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key Audit Matter How we addressed the Key Audit Matter
in the Audit
==============================================================
Going Concern and recoverability
of related party debt Our audit response involved the following:
As the entity on-lends to its * Assessment of management's review of the
related group entities, the principle recoverability of related party debt including their
risk facing the entity is that review of the parent entity's assessment of its going
these entities will be unable concern status.
to make their interest or principal
payments when they fall due and
this impacts on the entity's ability
to service its debt and to conclude * This incorporated consideration of the forecasts
that it is a going concern. prepared by the related entities and challenge of the
key assumptions based on our knowledge of those
Recoverability of these balances businesses, including availability of
is intrinsically linked to the
future viability of the related
entities and needs to be reviewed financing facilities and covenant
at each balance sheet date . compliance calculations through to
September 2021 .
As disclosed in note 1, following
the outbreak of COVID-19, and * Scenarios modelled by the parent entity include a
the resultant impact on the overall reverse stress test to analyse the current estimates
economy, the directors have considered of rent collection, property sales and maintenance
the appropriateness of the going and development spend that could
concern basis of preparation for
the entity by direct reference
to their consideration of the be sustained without breaching banking
ability of the parent to make covenants. We challenged the assumptions
interest payments. They have assessed used and mitigating actions included
that there are no factors or events within this scenario and reviewed
that may cast doubt on the ability the reverse stress test calculations.
to recover related party debt
and * We considered the adequacy of the disclosures in the
therefore to continue to operate financial statements against the requirements of the
for the foreseeable future . accounting standards.
The assessment of the recoverability
of the related party debt involves
a number of subjective judgements Key observations:
including rent collection, which
have been impacted by the current With regards recoverability of intercompany
COVID-19 pandemic . We have therefore debt, we noted no material exceptions
spent significant audit effort through performing these procedures.
in assessing the appropriateness
of the assumptions involved, and With regard to going concern, our
as such this has been identified key observations are set out in the
as a Key Audit Matter. conclusions related to going concern
section of our audit report.
---------------------------------------- --------------------------------------------------------------
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, individually or in the aggregate, could reasonably
be expected to influence the economic decisions of the users of the
financial statements. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take
into account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole .
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Materiality GBP1,965,000
------------------------------------------------------
Basis for materiality 1% of Total Liabilities
======================== ======================================================
Rationale for benchmark The Company holds listed debt and its primary purpose
adopted is as a treasury vehicle. The liabilities held on
the balance sheet are of primary interest to the
users of the financial statements.
======================== ======================================================
In considering individual account balances and classes of
transactions we apply a lower level of materiality in order to
reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds
materiality. Performance materiality was set at
GBP1,178,000, representing 60% of materiality. The level was
used to reflect the aggregation risk of errors in the Company .
We agreed with the Audit and Risk Committee that we would report
to the committee all individual audit differences identified during
the course of our audit in excess of GBP59,000. We also agreed to
report differences below these thresholds that, in our view ,
warranted reporting on qualitative grounds.
There were no misstatements identified during the course of our
audit that were individually, or in aggregate, considered to be
material in terms of their absolute monetary value or on
qualitative grounds.
An overview of the scope of our audit
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the geographic structure
of the Group, the accounting processes and controls and the
industry in which the Group operates.
Extent to which the audit is capable of detecting
irregularities
The extent to which the audit is capable of detecting
irregularities is affected by the inherent difficulty in detecting
irregularities, the effectiveness of the entity's controls, and the
nature, timing and extent of the audit procedures performed.
Irregularities that result from fraud might be inherently more
difficult to detect than irregularities that result from error.
As part of the audit we gained an understanding of the legal and
regulatory framework applicable to the Group and the industry in
which it operates, and considered the risk of acts by the Group
that were contrary to applicable laws and regulations, including
fraud. We considered the Company's compliance with laws and
regulations that have a direct impact on the financial statements
such as the Companies Act 2006.
We designed audit procedures at Company level to respond to the
risk, recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional
misrepresentations, or through collusion. Our tests included
agreeing the financial statement disclosures to underlying
supporting documentation, enquiries of the Directors and of
management and enquiries of third parties, where information from
that third party has been used by the Company in the preparation of
the financial statements.
There are inherent limitations in the audit procedures described
above and, the further removed non- compliance with laws and
regulations is from the events and transactions reflected in the
financial statements, the less likely we would become aware of it.
We did not identify any key audit matters relating to
irregularities, including fraud. As in all of our audits, we also
addressed the risk of management override of internal controls,
including testing journals and evaluating whether there was
evidence of bias by the Directors that represented a risk of
material misstatement due to fraud.
Other information
The Directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditor's
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We
have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the Strategic report and Directors'
report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
-- the Strategic report and Directors' report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company
and its environment obtained in the course of the audit, we have
not identified material misstatements in the Strategic report or
the Directors' report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion;
-- adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
-- the Company's 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.
Responsibilities of Directors
As explained more fully in the Directors' Responsibilities
statement as set out on page 9, the Directors are responsible for
the preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal control
as the Directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error .
In preparing the financial statements, the Directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so .
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the . basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at:
h ttps : // ww w . fr c . or q . u k/au d i torsresponsibilitie
s . This description forms part of our auditor's report.
Use of our report
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.
Hamid Ghafoor (Senior Statutory Auditor) For and on behalf of
BOO LLP, Statutory Auditor Chartered Accountants
3 Hardman Street Spinningfields Manchester
BOO LLP is a limited liability partnership registered -- in
England and Wales (with registered number OC305127).
2020 2019
Notes GBP'000 GBP '
000
Turnover 3 35
Operating costs Operating expenditure 3 (32)
======= ======
OPERATING SURPLUS 4 3
Finance income 5 6,606 182
Finance costs 6 (6,606) (182)
------- ======
PROFIT BEFORE TAX 3
Taxation 8 (1)
======= ------
PROFIT FOR THE YEAR 2
======= ------
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 2
======= ------
The Company ' s results relate wholly to continuing
activities .
The accompanying notes form part of these
financial statements .
Called
up Retained Total
share earnings equity
capital
GBP'000 GBP'000 GBP'000
On incorporation at 14 November 2018 50 50
Total comprehensive income for the period:
Result for the period
============= ========== -------------
Balance at 31 March 2019 50 50
Total comprehensive income for the year: Profit
for the year 2 2
============= ---------- =============
Balance at 31 March 2020 50 2 52
------------- ========== -------------
The accompanying notes form part of these
financial statements.
At 31 March 2020
============================================== ==========================================
2020 2019
Notes GBP'000 GBP '
000
FIXED ASSETS
196 ,
Investments 9 196,260 154
============= ============
CURRENT ASSETS
Debto r s - due within one year 10 234 216
Cash at bank and in hand 13 12
============= ------------
247 228
------------- ------------
CURRENT LIABILITIES
Creditors: Amounts falling due within one
year 11 (195) (178)
------------- ------------
NET CURRENT ASSETS 52 50
============= ============
TOTAL ASSETS LESS CURRENT LIABILITIES 196,312 196,204
------------- ============
Creditors : Amounts falling due after more (196 ,
than one year 12 (196,260) 154)
------------- ------------
TOTAL NET ASSETS 52 50
============= ============
CAPITAL AND RESERVES
Called up share capital 14 50 50
Retained earnings 2
------------- ============
TOTAL EQUITY 52 50
============= ============
The accompanying notes form part of these
financial statements.
The financial statements were authorised for issue and approved
by the Board on 20 August 2020.
G Robinson
Secretary
Company Registered Number 11678195
1. LEGAL STATUS
lncommunities Treasury Plc is a public limited company, limited
by shares and registered in England and Wales.
The Company's registered office is The Quays, Victoria Street,
Shipley, BD17 7BN.
2. ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Company are prepared in
accordance with applicable law and UK Generally Accepted Accounting
Principles (UK GAAP), including Financial Reporting Standard 102
(FRS 102) and the requirements of the Companies Act 2006, including
the provisions of the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008.
The financial statements are prepared under the historical cost
convention and presented in Sterling(GBP) rounded to the nearest
whole GBP1,000, except where otherwise indicated.
GOING CONCERN
The Company's business activities, its current financial
position and any factors likely to affect its future development
are set out in the Strategic Report.
The Company will continue its operations as a funding vehicle
for the Group and is aware that it is a requirement of the
agreements entered into by the Company with respect to the Bond
that it continues its existing relationship with the Group Company
and the Borrowers.
As highlighted above, the Company is dependent on the receipt of
funds from the Borrowers to meet its contractual obligations to the
bondholders. Each of the Borrowers has a long-term business plan in
place, which demonstrates its ability to support its existing debt
and meet its obligations. These plans have been adjusted for the
likely effects of the Covid-19 pandemic. They have also been stress
tested, with particular emphasis placed on examining and evaluating
the possible effects of the pandemic. These evaluations found that
the Borrowers' long-term business plans were robust and that the
effects of the pandemic are likely to be relatively short-term and
should not affect the ability of the Borrowers to meet their
obligations. Accordingly, no provision or impairment has been
recognised in the financial statements in respect of the advances
made to the Borrowers under the Credit Facilities.
On this basis, the Board has a reasonable expectation that the
Company has adequate resources to continue in operation for the
foreseeable future, being a period of twelve months from the date
on which the report and financial statements are signed. For this
reason, the Board continues to adopt the going concern basis in the
financial statements.
DISCLOSURE REQUIREMENTS
Statement of Cash Flows
Under FRS 102 - Section 7, the Company is exempt from the
requirement to include a Statement of Cash Flows within its
financial statements on the grounds that its ultimate parent
undertaking includes the results of the Company in its publicly
available consolidated financial statements. The Company has taken
advantage of this exemption.
Financial Instruments
Under FRS 102 - Sections 11 and 12, the Company is exempt from
the requirement to disclose information on its financial
instruments, including; categories of financial instruments, items
of income or expenses, net gains or losses, and details of
collateral, loan defaults or breaches, hedges, hedge fair value
changes recognised in profit or loss and in other comprehensive
income, and exposure to and management of financial risks. The
Company has taken advantage of this exemption.
Related Party Transactions
Under FRS 102 - Section 33, the Company is exempt from the
requirement to disclose transactions with its ultimate parent
undertaking and fellow subsidiaries. The Company has taken
advantage of this exemption.
SIGNIFICANT JUDGEMENTS AND ESTIMATES
Preparation of the financial statements requires management to
make significant judgements and estimates. The items in the
financial statements where these judgements and estimates have been
made include:
Significant Management Judgements
The following are the significant management judgements made in
applying the accounting policies of the Group that have the most
significant effect on the financial statements:
Recoverability of lntercompany Debt
lntercompany indebtedness represents almost 100% of the
Company's total assets. Accordingly, the receivables and the
recoverability of the sums due from fellow Group companies is a key
element in Management's consideration of the adoption of the going
concern basis of accounting in the preparation of the financial
statements. Management has concluded, based on their review of the
financial and strategic business plans of the relevant entities,
that there is nothing to suggest the sums will not be recoverable
in full over the life of the instruments, and hence no associated
provisions or impairments are required.
Significant Management Estimates
No significant estimates have been made by management in the
preparation of these financial statements.
TURNOVER AND REVENUE RECOGNITION AND OPERATING COSTS
The Company's turnover represents management fees at a rate
agreed with and charged to the Borrowers. Revenue is recognised in
the financial year to which it relates.
Operating costs are made up of professional fees and bank
charges incurred in carrying out the operations of the Company and
providing funds to the Borrowers.
BOND AND LOAN DISCOUNT ON ISSUE AND ISSUE COSTS
Bond and Loan Discount on Issue
Management has considered how bond and loan discount on issue
should be dealt with in the financial statements and determined
that these should be written off over the life of the respective
instruments using the effective interest rate method.
Bond and Loan Issue Costs
Management has considered how bond and loan issue costs should
be dealt with in the financial statements and determined that these
should be written off over the life of the respective financial
instruments in equal annual instalments.
FINANCE INCOME AND COSTS
Finance income and costs are recognised on an accruals basis in
the Statement of Comprehensive Income.
FINANCIAL INSTRUMENTS AND FINANCIAL ASSETS AND LIABILITIES
Financial assets and liabilities are recognised when the Company
becomes a party to the contractual provisions of the instrument,
and are offset only when the Company currently has a legally
enforceable right to set off the recognised amounts and intends
either to settle on a net basis, or to realise the asset and settle
the liability simultaneously.
Financial assets and liabilities are classified into specified
categories. The classification depends on the nature and purpose of
the financial assets and liabilities and is determined at the time
of recognition.
'Basic financial assets' include loans to and amounts owed by
Group undertakings, and cash at bank and in hand, and are initially
measured at the transaction price, including any transaction costs,
and are subsequently carried at amortised cost using the effective
interest method, unless the arrangement constitutes a financing
transaction, where the transaction is measured at the present value
of the future receipts discounted at a market rate of interest.
Financial assets measured at amortised cost are assessed for
indicators of impairment at the end of each reporting period. If an
asset is considered to be impaired, the impairment loss is
calculated, this being the difference between the carrying amount
and the estimated future cash flows discounted at the asset's
original effective interest rate, and recognised in the Statement
of Comprehensive Income.
'Basic financial liabilities' include accruals and deferred
income, and amounts due to bondholders (see below), and are
recognised at the transaction price, including transaction costs.
Transaction costs are written off over the period of the related
borrowings.
Financial instruments are accounted for as financial assets and
liabilities and are classified as such according to the substance
of the contractual arrangements entered into. Financial
instruments, which meet the criteria of a 'basic financial
instrument' as defined in FRS 102 - Section 11, are measured
initially at their transaction price and subsequently measured at
amortised cost.
Bonds are classed as a 'basic financial liability' as they meet
the criteria for 'basic financial instruments' under Section 11.9
of FRS 102. They are initially recognised at the transaction price,
including any discount on issue and transaction costs, and
subsequently measured at amortised cost using the effective
interest method. Coupons payable are also classed as 'basic
financial liabilities' and are recognised on the basis of the
effective interest method, and are included in finance costs, with
any discount on issue and transaction costs being written off over
the life of the bond.
The Company's financial instruments, which are the Credit
Facilities provided under formal Loan Agreements by the Company to
lncommunities and Sadeh Lok (fellow subsidiaries), and the Bond
issued by the Company on 21 March 2019, have been accounted for as
'basic financial instruments'.
FIXED ASSETS INVESTMENTS
The loans to Group undertakings are classified as fixed asset
investments in view of the 30-year maturity period. These loans are
held at amortised cost using the effective interest rate method to
write off the discount on issue over the life of the loans, and
equal annual instalments to write off the loan issue costs.
DEBTORS
Short-term debtors are measured at transaction price, less any
impairment.
LIQUID RESOURCES
The Company maintains its available cash resources in a bank
current account and, or readily disposable current asset
investments.
CREDITORS
Short-term creditors are measured at the transaction price.
3. TURNOVER AND OPERATING COSTS
Turnover of GBP35k (2019: GBPNil) represents management fees
charged to the Borrowers.
Operating costs of GBP32k (2019: GBPNil) are made up of
professional fees and bank charges incurred in carrying out the
operations of the Company and providing funds to the Borrowers.
4. OPERATING SURPLUS 2020 2019
GBP'000 GBP'000
Operating surplus is stated after charging:
Audit services - statutory audit of the Company (13)
For 2019, Auditor's remuneration for audit and any other
non-audit services was borne by the ultimate parent undertaking and
was disclosed in that company's consolidated report and financial
statements.
5. FINANCE INCOME 2020 2019
GBP'000 GBP'000
Investment income from Group undertakings 6,500 178
Amortisation of loan issue costs 106 4
================
6,606 182
=============== ================
6. FINANCE COSTS 2020 2019
GBP'000 GBP'000
Interest payable to bondholders 6,500 178
Amortisation of Discount on Issue and Bond Issue Costs 106 4
=============== ================
6,606 182
7. BOARD OF DIRECTORS, EXECUTIVE MANAGEMENT TEAM, AND EMPLOYEES
The Directors and members of the Executive Management Team who
held office during the year and from the year-end to the date of
this report are set out on page 1.
During the year M Walker stepped down as a member of the Group
Board after serving his permitted nine-year term, and resigned as a
Director of the Company. At the year-end, the Board of Directors
comprises three members. An additional Director was appointed post
year-end. The Directors are either members of the Group Board or
members of the Executive Management Team.
The Directors and members of the Executive Management Team form
the key management personnel of the Company. The contracts of
employment of the members of the Executive Management Team are held
by the Group Company and their associated employment and pension
costs are absorbed by the Group Company.
Details of the Directors' remuneration and expenses, and
relevant details relating to the employment of the members of the
Executive Management Team are set out in the Group Company's
consolidated report and financial statements.
The Company has no employees.
8. TAXATION
Current tax:
UK Corporation tax on profit for the year
2020 2019
GBP'000 GBP'000
1
Total current tax
1
Factors affecting the tax charge for the year:
The tax assessed for the year is different from the standard
rate of corporation tax in the UK. The differences are explained
below:
Profit before tax 2020 2019
GBP'000 GBP'000
3
======== --------------
Profit before tax multiplied by the standard rate
of corporation tax in the UK of 19% (2019: 19%) 1
======== ==============
Tax expense 1
9. FIXED ASSETS INVESTMENTS 2020 2019
GBP'000 GBP'000
Loans to Group undertakings net of discount and loan
issue costs: At 1 April 196,154 196,150
Movement in unamortised discount and loan issue costs
during the year 106 4
--------- ---------
At 31 March 196,260 196,154
The Company provides Credit Facilities to lncommunities Limited
('lncommunities') and Sadeh Lok Limited ('Sadeh Lok') (fellow
subsidiaries) (the 'Borrowers') under formal Loan Agreements
between the Company and the Borrowers.
The Company has made advances under these Credit Facilities to
the Borrowers of principal amounts totalling GBP200m. These
principal amounts are advanced at a discount and after loan issue
costs totalling GBP3 . 85m. These advances are in the ratio 90 : 10
(lncommunities/Sadeh Lok).
The discount and loan issue costs are amortised over the period
of the Credit Facilities, which run until March 2049 .
Interest is receivable by the Company from the Borrowers at a
rate of 3 . 25% on the principal amounts.
Details of the facilities and advances and the corresponding
bond issue are set out in the Strategic Report and Note 13. The
related accounting policies are set out in Note 2.
10. DEBTORS 2020 2019
GBP'000 GBP'000
Due within one year:
Amounts owed by Group undertakings 234 216
Amounts owed by Group undertakings include GBP37.5k in respect
of amounts owed by the Group Company for unpaid share capital (Note
14.).
11. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 2020 2019
GBP'000 GBP'000
Corporation tax 1
Accruals and deferred income 194 178
-------------- ---------------
195 178
============== ===============
12. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN 2020 2019
ONE YEAR GBP'000 GBP'000
Debt - Amounts due to bondholders (Note 13.) 196,260 196,154
13. DEBT ANALYSIS Principal
Amount Amount
of the Bond due to
Issued Discount Issue bond-
Bond on Issue Costs holders
GBP'000 GBP'000 GBP'000 GBP'000
At 31 March 2019 200,000 (1,630) (2,216) 196,154
Amortisation of Discount on Issue
and Bond Issue Costs during the year 32 74 106
========= ========= ========= =========
At 31 March 2020 200,000 (1,598) (2,142) 196,260
On 21 March 2019, the Company issued a 30-year, GBP250m own name
public issue dated senior secured bond (the 'Bond') at a coupon
rate of 3.25%. The initial offer to the market was for a principal
amount of GBP200m of bonds (the 'Principal Amount', the 'Issued
Bond') with a principal amount of GBP50m of bonds retained for
later issue (the 'Retained Bond').
The Issued Bond was priced at 99.184% (the 'Bond Issue Price')
equivalent to a Discount on Issue of GBP1.632m (0.816%). The net
funds received were GBP198.368m (GBP99.184 per GBP100 issued).
In arranging the Bond, the Company incurred Bond Issue Costs of
GBP2.218m, which were paid directly from the proceeds of the Bond
or by other Group entities. These latter costs were reimbursed by
the Company through intercompany accounts.
The Discount on Issue and the Bond Issue Costs are amortised
over the term of the Bond. Interest is payable by the Company to
the bondholders at a rate of 3.25% on the Principal Amount.
The Bond is secured by way of fixed charges over the housing
properties of lncommunities Limited (a fellow subsidiary) in favour
of Prudential Trustee Company Limited acting as Security
Trustee.
The Principal Amount is due for repayment on 21 March
2049.
14. CALLED UP SHARE CAPITAL 2020 2019
GBP'000 GBP'000
At 31 March 50 50
-------------- ---------------
The Company's share capital is made up of 50,000 ordinary shares
of GBP1 each, allotted, called-up, and partly paid at GBP0.25
each.
15. RELATED PARTY TRANSACTIONS
The Company has taken advantage of the exemption under FRS 102 -
Section 33, not to disclose transactions with its ultimate parent
undertaking and fellow subsidiaries.
On this basis, the Company has no related party transactions
that are required to be disclosed.
16. ULTIMATE PARENT UNDERTAKING
The Company's ultimate parent undertaking is lncommunities Group
Limited. Its report and consolidated financial statements for the
year ended 31 March 2020 are available from Companies House, Crown
Way, Cardiff, CF14 3UZ.
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END
FR FLFSRARIIVII
(END) Dow Jones Newswires
September 30, 2020 13:32 ET (17:32 GMT)
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