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Cambridgeshire Cap (54WW)

Cambridgeshire Cap

Annual Financial Report
RNS Number : 2435L
Cambridgeshire Housing Cap PLC
04 September 2019
 

                                    Company Registration Number: 09102394

 

 

 

 

 

 

Cambridgeshire Housing Capital plc

 

 

 

Report and Financial Statements

 

For the year ended 31 March 2019

Contents

 

 

 

Statutory information                                                                                                                                  2

 

 

Strategic report                                                                                                                                            3 - 4

 

 

Directors' report                                                                                                                                          5 - 7

 

 

Corporate governance statement                                                                                                            8 - 9

 

 

Independent auditor's report                                                                                                                   10 - 14

 

 

Statement of income and retained earnings                                                                                          15

 

 

Statement of financial position                                                                                                                  16

 

 

Notes to the financial statements                                                                                                             17 - 22

Statutory information

 

 

Company registration number                       09102394

 

 

Directors                                                             Claire Higgins

                                                                             Michael Heekin

                                                                             Donald Bell

                                                                             Edmund Smy

 

 

Secretary                                                            Claire Higgins

                                                                  

 

 

Registered Office                                              c/o Cross Keys Homes Shrewsbury Avenue Peterborough Cambridgeshire

                                                                             PE2 7BZ

 

 

Independent Auditor                                       KPMG LLP

                                                                             One Snowhill

                                                                             Snow Hill Queensway

                                                                             Birmingham

                                                                             B4 6GH

 

 

Bankers                                                               Royal Bank of Scotland plc

                                                                             1st Floor

                                                                             Conqueror House

                                                                             Vision Park

                                                                             Histon

                                                                             Cambridge

                                                                             CB24 9NL

 

 

Solicitors                                                             Trowers & Hamlins LLP

                                                                             3 Bunhill Row

                                                                             London

                                                                             EC1Y 8YZ

Strategic report

 

Business review and key performance indicators

 

The Company was incorporated during 2014 as a subsidiary of Cross Keys Homes Limited. The major purpose of the Company is to support the parent company's objectives. The parent company was established in 2004 and offers social and affordable housing in and around Peterborough together with other tenant related services.

 

In September 2014 the Company issued a 31 year £150 million bond. The initial issue sold £105 million of the bond. In 2016 the remaining £45 million retained bond was sold at a premium of £4.3 million. The bond carries an interest rate of 4.25% and is repayable in 2045. In September 2014 the net proceeds of the bond (less issue costs and the premium on issue) were on lent to Cross Keys Homes Limited immediately. In 2016 the proceeds of the sale less the premium element of the retained bond was lent on immediately. In March 2018 the premium element of the retained bond sale was lent on to CKH at an interest rate of 4.25%.

 

Given the Company's major objective and strategy is to support the parent company's operation the directors assess the Company's success by reference to the parent company's performance. In addition to the bond, the remaining debt of the parent company comprised of a mix of fixed, variable, cancellable and interest linked loans totalling £134.6 million. This is in compliance with established treasury management limits, which have been designed to manage the group's exposure to interest rate fluctuations.

 

The group treasury policy and associated procedures were updated to reflect the new environment as surplus proceeds from the bond were invested with a range of counterparties, including AAA rated Money Market Funds and banks/building societies, for periods ranging from instant access to 12 months, ensuring sufficient liquidity is maintained to meet operational cash flow requirements.

 

The parent company ended the year with a loan/bond and overdraft arrangements totaling £284.6 million and external cash investments of £14 million. Further details of the loan balances can be found in the group financial statements.

 

The gearing ratio, calculated as net debt divided by the historic cost of housing properties was maintained at 49% (2018 - 49%). The group's borrowing arrangements require compliance with a number of financial and non-financial covenants. The group's position is monitored on an on-going basis and reported to the board regularly. Recent reports confirm that the group was in compliance with its loan covenants at the reporting date and throughout the year and that the board expects the parent company and the group to remain compliant in the foreseeable future.

 

Principal risks and uncertainties

 

The principal risks facing the Company are:

 

•       the inability to meet its obligations in respect of the Bond Trust Deed; and

•       counterparty risk from the parent company.

 

The risks facing the parent company could also have a material effect on the performance of Cambridgeshire Housing Capital plc. These include:

 

•      welfare reform;

•      risk that the operating surplus of the parent company does not perform in line with its business plan; and

•      the risk that the loan covenants are breached.

 

 

 

Strategic report (continued)

 

Management of these risks is controlled by:

 

•       monitoring the operating surplus of the parent company and how it has performed against the business plan;

•       review of factors that may impact operating surpluses including Welfare Reform; such factors increase the risk that the cash flow obligations may not be met;

•       monitoring the covenants for both actual and anticipated performance.

 

Financial risk management policies and objectives

 

The group uses various financial instruments, including loans and cash to raise finance for the group's operations. There are no non-basic financial instruments nor any exposure to exchange rates. The existence of these financial instruments does expose the group to some other financial risks. The risks arising from the group's financial instruments are considered by the directors to be interest rate risk, liquidity risk and credit risk. The parent company board review and agree policies for managing each of these risks and they are summarised below:

 

Interest rate and inflation risks

 

The group finances its operations through a mixture of retained surpluses, bank borrowings and capital market bonds. The group's exposure to interest fluctuations on its borrowings is managed by the use of both fixed and variable rate facilities, including interest rate swap instruments. The group's treasury policy permits fixed rate loans to be within a range of 50%-90% of total loans. The reason for such a large range is to provide flexibility in managing both interest rate and inflation risk together.

 

Liquidity risk

The group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and invest cash assets safely and profitably. At year end the group held cash balances totaling £14m with a current ratio of 0.8 (2018 - 2.0).

 

Credit risk

The group's principal credit risk relates to tenant arrears. This risk is managed by providing support to eligible tenants with their application for Housing Benefit and closely monitoring the arrears of self-funding tenants. Welfare Reform and resulting changes to the benefits system has been identified as a key risk to the group, and a project team assesses the impact of emerging changes.

 

The Company's exposure to the above risks is considered to be mitigated by the terms of the bond agreement.

 

Future developments

 

The Directors do not anticipate any change in the Company's principal activity. No further bond issues are planned in the next twelve months.

 

 

……………………………………

Donald Bell

Chair

29 July 2019

 

 

 

Directors' report

 

The Directors submit their Report and the audited Financial Statements for the year ended 31 March 2019.

 

Directors

 

The directors who served the Company during the year were as follows:

 

•       Claire Higgins

•       Michael Heekin

•       Donald Bell

•       Edmund Smy

 

In accordance with the Company's Articles of Association, none of its Directors are required to retire. None of the Directors who held office at the beginning or end of the year had any interest in the shares of the Company.

 

Distribution of profits

 

The Directors recommend that a gift aid donation to the parent company will be made following approval of the financial statements. The amount to be paid will be determined at a Board meeting.

 

Statement of directors' responsibilities in respect of the strategic report, directors' report and the financial statement

The directors are responsible for preparing the Strategic Report, the Directors' Report and 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 are required to prepare the financial statements in accordance with UK accounting standards, 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 its profit or loss for that period. In preparing these financial statements, the directors are required to:

 

•       select suitable accounting policies and then apply them consistently;

•       make judgements and estimates that are reasonable and prudent;

•      state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

•       assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

•     use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

 

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

 

 

Directors' report (continued) 

 

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.

 

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

Responsibility statement of the directors in respect of the annual financial report

 

We confirm that to the best of our knowledge:

 

•       the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company; and

•     the strategic report includes a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face.

 

We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

 

Going concern

 

The Company's business activities, its principal risks and uncertainties and factors likely to affect its future position are set out within the Strategic Report. We consider that there are no events since the financial year-end that have had an important effect on the financial position of the group.

 

The financial support available to the Company from the parent company gives reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, it continues to adopt the going concern basis in the financial statements.

 

Viability statement

 

As required by the provisions of the UK Corporate Governance Code the Directors have assessed the viability of the company over a three year period due to the longer nature of the liabilities within the issued bond.

 

The Group produces a 30 year business plan with a five year detailed outlook. The Business Plan is stress tested to ensure that all loan repayments will continue to be met under adverse conditions with mitigating actions identified to manage any downturn in the operating environment. The Group's business plan is also assessed as part of regulatory review by the Social Housing Regulator and assessed by Standard & Poors credit rating agency. The management framework is regularly reviewed and updated.

 

The Group Board manages the key risks identified within the Strategic Report through a risk management framework which is regularly reviewed and updated. The liquidity of the group is strong with £14m of cash at the year end and £75m of undrawn loan facilities which will support the delivery of the current business plan, with additional financing not required until August 2021.

 

The bond holders have a legal charge over properties which are secured against the loan.

 

The director's view is that all liabilities will be able to be met as they fall due over the forthcoming three year period.

 

 

Directors' report (continued) 

 

Report of the Audit & Risk Committee

 

The Audit & Risk Committee is responsible for the review of internal controls of the group, the oversight of the work of internal audit, reviewing the accounting policies and any reports of fraud, bribery or money laundering. The Audit & Risk Committee also reviews and feeds back on the work of the external auditors. The Committee are satisfied that the key personnel from KPMG involved in delivering the audit service demonstrate the appropriate level of objectivity and independence.

 

Inability to service debt

 

The Audit & Risk Committee considers that the principal risk facing the company is the inability of the Group to service debt and repay the debt as it falls due. Management gave assurance that the risk is mitigated and that the group can service debt as the group has internal control arrangements in place as well as strong liquidity position with £14m cash and £75m of undrawn bank facilities as at 31 March 2019. The Business Plan is stress tested to ensure that all loan repayments will continue to be met under adverse conditions with mitigating actions identified to manage any downturn in the operating environment.

 

 The Group's business plan is also assessed as part of regulatory review by the Social Housing Regulator and assessed by Standard & Poors credit rating agency. The management framework is regularly reviewed and updated.

 

The Audit & Risk Committee considered the key audit matter identified by the auditors and it is considered below.

 

The CKH board questioned management on the proposed business plan and were satisfied that CKH could service debt when it falls due. The Audit & Risk Committee considers the work of internal and external audit and the appointment of external auditors in the scope of their work. It also considers the risk management framework, internal control framework and compliance issues. It reports to the Board on the effectiveness of internal controls and considers statutory accounts before they are presented to the Board. The liquidity position and cash flow forecasts are examined by the Finance Committee and the Board regularly.

 

Disclosure of information in the strategic report

 

Information concerning the business review, key performance indicators, principal risks and uncertainties, financial risk management policies and objectives and future developments is included within the Strategic Report.

 

Auditors

 

KPMG LLP have expressed their willingness to continue in office. Accordingly a resolution in accordance with section 489(4) of the Companies Act 2006 is to be proposed for the re-appointment of KPMG LLP.

 

Signed on behalf of the Board of Directors


 

 

 

………………………………

Claire Higgins

Secretary

29 July 2019

 

Registered in England - No. 9102394

 

 

 

Corporate governance statement

 

The Company has a listed security in issue and is required to comply with the applicable sections DTR 7.1 and DTR 7.2 of the Financial Services Authority ("FSA") handbook.

 

The Company does not comply with the UK Corporate Governance Code. However, we have reported on our Corporate Governance arrangements by drawing on best practice available, including those aspects of the UK Corporate Governance Code we consider to be relevant to the Company and best practice.

 

The Board and its Directors

 

The Company is led by a Board of Directors ("Board"). The appointment of the Directors is pursuant to the Articles of Association dated 25 June 2014.

 

Each Director is of equal standing. Owing to the size and nature of the Company, there is no appointed Chief Executive. There is also no distinction drawn between executive and non-executive Directors.

 

As the Board all have considerable experience within the Social Housing sector, and also act in various capacities for the Cross Keys Homes Group, the Company does not arrange any formal induction or training for new Directors. This arrangement is reviewed on an on-going basis to consider its appropriateness.

 

The Directors are covered by the Cross Keys Homes Group's directors' and officers' indemnity insurance policy.

 

The Board acknowledges that it is collectively responsible for the success of the Company by providing leadership, setting the Company's strategic aims, ensuring that the necessary financial and human resources are in place and reviewing management performance.

 

In order to discharge these responsibilities, the Directors have met three times during the year covered by these financial statements. The table below indicates the number of meetings held and the number of meetings attended by each Director.

 

Number of meetings held in year

3

 

Claire Higgins

3

Donald Bell

2

Michael Heekin

3

Edmund Smy

3

 

 

All Directors receive appropriate and timely information and briefing papers in advance of the Board Meetings. Day to day management of the Company is delegated to the Cross Keys Homes Limited's directors' team under Group Standing Orders arrangements.

 

Appointments to the Board are made in line with the Articles of Association. The parent company, Cross Keys Homes Limited has a Performance and Governance committee that provides oversight for the entire Cross Keys Homes Group of companies which includes Cambridgeshire Housing Capital plc. The Company does not have a separate and dedicated Nominations and Remuneration committee as the size and nature of the Company does not warrant a dedicated committee, but relies on the Group Performance & Governance committee for this function.

 

 

Corporate governance statement (continued)

 

The Board and its Directors (continued)

 

The Board does not undertake a formal annual evaluation of its performance and that of its Directors and there is no formal policy on re-election of Directors. The Directors, however, ensure that the Board is structured in such a way that each member of the Board is able to bring different experiences and skills to the operation of the Company and encourages and supports each Director to regularly update and refresh their skills and knowledge.

 

Internal control and risk management systems

 

The Board has established processes for identifying, evaluating and managing the significant risks the Company faces. The Board regularly reviews these processes, which have been in place from the commencement of trading to the date of approval of this report. The risks are also reviewed quarterly during the Cross Keys Homes Group Audit and Risk Committee meetings.

 

The Board is responsible for the Company's system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.

 

The Board's monitoring covers all controls, including financial, operational and compliance controls and risk management to ensure it meets the minimum requirements of DTR 7.1.3. It is based principally on reviewing financial and operational reports from management to consider whether significant risks are identified, evaluated, managed and controlled and whether any significant weaknesses are promptly remedied or indicate a need for more extensive monitoring.

 

As part of the requirements of DTR 7.1.3 the Board specifically monitors the financial reporting process and the statutory audit of the annual accounts through reports provided by management. Furthermore, the Board reviews and monitors the independence of the statutory auditor and considers the relationship with Cross Keys Homes Limited as part of its assessment. This is monitored as part the Cross Keys Homes Group Board meetings which consider the relationship with the statutory auditor and all group subsidiaries.

 

The Board members regularly review whether the existing internal controls to monitor the requirements of DTR 7.1.3 are sufficient and take appropriate action as necessary.

 

The Board has not identified nor been advised of any failings or weaknesses which it has determined to be significant during the course of its review of the systems of internal control.

 

The Board considers the existing internal controls to be sufficient and in view of the small number of transactions does not consider there to be a requirement for a specific Cambridgeshire Housing Capital plc internal audit function. The requirement for a dedicated internal audit function is considered annually.

Independent auditor's report to the members of Cambridgeshire Housing Capital plc

 

1 Our opinion is unmodified 

 

We have audited the financial statements of Cambridgeshire Housing Capital plc ("the Company") for the year ended 31 March 2019 which comprise the Statement of Income and Retained Earnings, the Statement of Financial Position and the related notes, including the accounting policies in note 3. 

 

In our opinion the financial statements:

 

·       give a true and fair view of the state of the Company's affairs as at 31 March 2019 and of its profit for the year then ended; 

·       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

·       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 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 and Risk Committee. 

 

We were appointed as auditor by the directors on 18 February 2018.  The period of total uninterrupted engagement is for the 2 financial years ended 31 March 2019. 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 judgment, 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 matter (unchanged from 2018) in arriving at our audit opinion above, together with our key audit procedures to address this matter and, as required for public interest entities, our results from those procedures.  This matter was 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 this matter. 

 

      Recoverability of fixed asset investment

      Fixed asset investment - £152m (2018: £152m)

      Refer to page 7 (Audit and Risk Committee's Report), pages 16-18 (accounting policies) and page 18-19 (financial disclosures).

     

 

 

 

      The Company's primary activity is to issue bonds, source investor financing and on-lend to the Parent. It therefore has long term liabilities which relate to the bonds issued and long term intercompany debtors which relate to the loans provided to the Parent.

 

      The carrying amount of the long term intercompany debtor balance represents 99.7% of the Company's total assets.  Their recoverability is not at a high risk of significant misstatement or subject to significant judgement.  However, due to their materiality in the context of the Company financial statements, this is considered to be the area that had the greatest effect on our overall Company audit.

 

      Whilst there are small amounts of financial income and financial expense during the loan period, the risk mainly stems from the expectation of the ability of the Parent to repay the loan in 26 years.

 

      Our response

      Our procedures included:

 

i.        Assessment of Recoverability: Assessing 100% of intercompany long term debtors owed by the Parent (2018: 100%) to identify, with reference to the Parent's financial draft balance sheet, whether they have a positive net asset value and sufficient headroom to cover the debt owed, and that future cash flow plans include repayment of the debt.

ii.       Test of detail: Assessing the creditor recognised by the Parent and comparing it to the debtor recognised by the company.

iii.      Test of detail: Assessing the balance on-loaned to the group with reference to the bond issue funds and the onward loan document between the Company and the Parent.

 

      Our results

      We found the Company's assessment of the recoverability of the fixed asset investment balance to be acceptable.

 

3    Our application of materiality and an overview of the scope of our audit 

 

      Cambridgeshire Housing Capital PLC is part of a Group headed by Cross Keys Homes Limited. Materiality of £1m, as communicated by the Group audit team, has been applied to the audit of the Company.

 

      We agreed to report to the Audit and Risk Committee any corrected or uncorrected identified misstatements exceeding £50,000, in addition to other identified misstatements that warranted reporting on qualitative grounds.

 

      Our audit of the Company was undertaken to the materiality level specified above and was all performed at the Company's head office in Peterborough.

 

4    We have nothing to report on 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").

 

 

Our responsibility is to conclude on the appropriateness of the Directors' conclusions and, had there been a material uncertainty related to going concern, to make reference to that in this audit report. 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 absence of reference to a material uncertainty in this auditor's report is not a guarantee that the Company will continue in operation.

 

In our evaluation of the Directors' conclusions, we considered the inherent risks to the Company's business model, including the impact of Brexit, and analysed how those risks might affect the Company's financial resources or ability to continue operations over the going concern period.  We evaluated those risks and concluded that they were not significant enough to require us to perform additional audit procedures.

 

Based on this work, we are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least a year from the date of approval of the financial statements.

 

5    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:

 

·       we have not identified material misstatements in the strategic report and the directors' report; 

·       in our opinion the information given in those reports for the financial year is consistent with the financial statements; and 

·       in our opinion those reports have been prepared in accordance with the Companies Act 2006. 

 

Corporate governance disclosures

 

Based solely on our work on the other information described above:

 

·       with respect to the Corporate Governance Statement disclosures about internal control and risk management systems in relation to financial reporting processes and about share capital structures: 

·       we have not identified material misstatements therein; and 

·       the information therein is consistent with the financial statements; and 

·       in our opinion, the Corporate Governance Statement has been prepared in accordance with relevant rules of the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority. 

 

We are also required to report to you if a corporate governance statement has not been prepared by the Company.  We have nothing to report in these respects.

 

6    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:

 

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

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

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

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

 

      We have nothing to report in these respects. 

 

7    Respective responsibilities

 

Directors' responsibilities 

 

      As explained more fully in their statement set out on page 5, 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, other irregularities (see below), 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

 

      Irregularities - ability to detect

 

      We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our sector experience, and through discussion with the directors (as required by auditing standards), and from inspection of the entity's transactions.

 

     

 

We had regard to laws and regulations in areas that directly affect the financial statements including financial reporting (including related company legislation) and taxation legislation.  We considered the extent of compliance with those laws and regulations as part of our procedures on the related financial statement items.

 

      In addition we considered the impact of laws and regulations in the specific areas of anti-bribery, regulatory capital and liquidity and certain aspects of company legislation recognising the financial and regulated nature of the company's activities and its legal form.  With the exception of any known or possible non-compliance, and as required by auditing standards, our work in respect of these was limited to enquiry of the directors and inspection of the entity's transactions.

 

      We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit. 

 

      As with any audit, there remained a higher risk of non-detection of non-compliance with relevant laws and regulations (irregularities), as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. 

 

8    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. 

  

 

Sarah Brown (Senior Statutory Auditor) 

for and on behalf of KPMG LLP, Statutory Auditor 

Chartered Accountants 

One Snowhill

Snow Hill Queensway

Birmingham B4 6GH 

 

Date:

Statement of income and retained earnings for the year ended 31 March 2019

 

 

 

 

 

 

 

£000

£000

Turnover

 

-

-

 

 

 

 

Operating profit

 

-

-

 

 

 

 

Interest receivable and similar income

6

6,604

6,439

Interest payable and similar charges

7

(6,288)

(6,290)

 

 

 

 

Profit on ordinary activities before taxation

 

316)

149)

 

 

 

 

Taxation

8

-

-

 

 

 

 

Profit after taxation

 

316)

149)

 

 

 

 

Retained earnings at the beginning of the year

 

149)

99

 

 

 

 

Profit for the year

 

316)

149)

 

 

 

 

Gift aid distribution

 

(308)

(124)

 

 

 

 

Tax relief on gift aid distribution

 

-

25

 

 

 

 

Retained earnings at the end of the year

 

157)

149)

 

The above relates wholly to continuing operations.

 

There is no difference between the result on ordinary activities before taxation and the result for the year stated above and their historic cost equivalent.

 

There were no items of other comprehensive income in either the current or previous year.

 

 

 

 

The notes on pages 17 to 22 form part of these financial statements.

Statement of financial position as at 31 March 2019

 

 

 

 

 

 

£000

£000

 

 

 

 

Fixed asset investment

9

152,285

152,372

 

 

 

 

Current assets

 

 

 

Debtors - amount falling due within one year

10

298)

299)

Cash at bank

 

168)

159)

 

 

 

 

 

 

466)

458)

 

 

 

 

Creditors - amounts falling due within one year

11

(297)

(297)

 

 

 

 

Net current assets

 

169)

161)

 

 

 

 

 

 

 

 

Total assets less current liabilities

 

152,454

152,533

 

 

 

 

Creditors - amounts falling due after more than one year

12

(152,285)

(152,372)

 

 

 

 

Net assets

 

169)

161)

 

 

 

 

Capital and reserves

 

 

 

Called-up share capital

13

12

12

Retained earnings

15

157)

149)

 

 

 

 

Shareholders' funds

 

169)

161)

 

 

These financial statements were approved and authorised by the Directors for issue on 29 July 2019.

 

 

Signed on behalf of the Board of Directors

 

 

 

……………………………………

Claire Higgins

Director

 

 

Company Registration Number: 09102394

 

 

 

The notes on pages 17 to 22 form part of these financial statements.

Notes to the financial statements

 

1.               Statutory information

 

Cambridgeshire Housing Capital plc is a public company, limited by shares and registered in England and Wales (no. 09102394). The Company's registered office is c/o Cross Keys Homes, Shrewsbury Avenue, Peterborough, PE2 7BZ.

 

 

2.               Statement of compliance

 

The financial statements have been prepared in accordance with the provisions of Financial Reporting Standard 102, "The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland" (United Kingdom Generally Accepted Accounting Practice).

 

 

3.               Accounting policies

 

3.1             Basis of preparation

 

The financial statements have been prepared on the going concern basis, under the historical cost convention and in accordance with the Companies Act 2006.

 

The financial statements are presented in Sterling, the functional currency of the entity, rounded to the nearest thousand.

 

3.2             Going concern

 

The directors have assessed the ability of the Company to continue to operate as a going concern based on the Company being a non-trading holding Company, which has the continuing support of its parent undertaking.

 

After reviewing the Company's forecasts and projections, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, being a period of not less than 12 months from the date of approval of these financial statements. The Company therefore continues to adopt the going concern basis in preparing its financial statements.

 

3.3             Disclosure exemptions

 

The Company is a qualifying entity for the purposes of FRS 102 as it is a member of a group that prepares publically-available consolidated financial statements, and this Company's results are included in the consolidation.

 

The following disclosure exemptions have been adopted in accordance with the exemptions detailed in paragraph 1.12 of FRS 102:

 

a)     The requirement to present a reconciliation of the number of shares outstanding at the beginning and end of the year

b)    The requirement to present a statement of cash flows

c)     Financial instruments disclosures, including categories of financial instruments and exposure to and management of financial risks

 

In addition, details of transactions between wholly-owned subsidiaries are not included, as per the disclosure exemption provided by paragraph 33.1A.

 

 

 

Notes to the financial statements (continued)

 

3.               Accounting policies (continued)

 

3.4             Interest receivable and similar income

 

Interest receivable is recognised as interest accrues, using the effective interest method (that is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset).

 

3.5             Taxation

 

The current tax charge is based on the results for the year and is measured at the amounts expected to be paid based on the tax rates and laws substantially enacted by the reporting date. Current tax is recognised in the Statement of income and retained earnings for the year.

 

3.6              Investments

 

Investments are measured at cost less accumulated impairment.

 

3.7              Financial instruments - initial recognition

 

Loans and other financial instruments are recorded in the Statement of financial position at the amount of the gross proceeds, less the initial cost of raising the finance which is amortised over the period of the loan using the effective interest rate.

 

Financial assets and liabilities are recognised when the Company becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted for transaction costs.

 

Issue costs and discounts/premiums on the issue of the bond are recognised in profit or loss over the life of the bond.

 

3.8              Financial assets

 

Financial assets classed by the Company as loans and receivables include fixed asset investments and cash.

 

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured subsequent to initial recognition at amortised cost, discounted at a rate equal to the original effective rate, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in the statement of income and retained earnings.

 

Provision against financial assets is made when there is objective evidence that the Company will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the original effective rate. An assessment for impairment is undertaken at least at each reporting date.

 

 

Notes to the financial statements (continued)

 

3.               Accounting policies (continued)

 

3.9             Financial liabilities

 

Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Company becomes a party to the contractual provisions of the instrument.

 

Financial liabilities are measured subsequent to initial recognition at amortised cost using discount of the original effective rate, with interest-related charges recognised as an expense in finance cost in the Statement of income and retained earnings. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the Statement of income and retained earnings on an accrual basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the year in which they arise.

 

Financial liabilities are de-recognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires.

 

 

4.               Judgements in applying accounting policies and key sources of estimation uncertainty

 

Preparation of 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:

 

•       The ability of Cross Keys Homes Limited to make interest payments or principal payments when they fall due. This is mitigated through a secure loan agreement backed by assets owned by Cross Keys Homes Limited. This is also backed by a long term business plan with a positive trajectory.

•       The bond and the intercompany debtor are classified as basic financial instruments. This is following a review of the details and terms of the bond issue and the on-lending agreement. No terms have been identified which would cause the bond and intercompany debtor to fail the basic classification criteria according to section 11 of FRS 102.

 

 

5.               Operating profit

 

None of the Directors received any remuneration as Directors from the Company during the year. The Company has no directly employed personnel.

 

Audit fees of £5,500 plus VAT (2018 - £5,500 plus VAT) and other administrative expenses are borne by Cross Keys Homes Limited, the ultimate parent undertaking.

 

 

6.              Interest receivable and similar income

 

 

 

 

2019

£000

 

2018

£000

 

Interest on fixed asset investments

Unwinding of discounts on NPV

Bank deposit interest receivable

 

 

 

6,544

60

-

 

 

 6,377

60

2

 

 

 

 

 

 

 

 

 

 6,604

 

 6,439

 

 

Notes to the financial statements (continued)

 

6.              Interest receivable and similar income (continued)

 

In September 2014 the Company issued a 31 year £150 million bond. The initial issue sold £105 million of the bond. In 2016 the remaining £45 million retained bond was sold at a premium of £4.3 million. The bond carries an interest rate of 4.25% and is repayable in 2045. In September 2014 the net proceeds of the bond (less issue costs and the premium on issue) were on lent to Cross Keys Homes Limited immediately. In 2016 the proceeds of the sale less the premium element of the retained bond was lent on immediately. In March 2018 the premium element of the retained bond sale was lent on to CKH at an interest rate of 4.25%.

 

 

7.              Interest payable and similar charges

 

 

 

 

 

 

2019

£000

 

2018

£000

 

Bond interest payable

Unwinding of discounts on NPV

Interest payable to group undertakings

Bank fees

 

 

 

 6,375

(87)

-

-

 

 

 6,375

(87)

-

2

 

 

 

 

 

 

 

 

 

6,288

 

6,290

                   

8.              Taxation

 

 

 

 

 

 

2019

£000

 

2018

£000

 

Current tax

UK current tax expense

 

 

 

 

-

 

 

 

-

                   

 

The tax assessed for the year is lower than the standard rate of corporation tax in the UK of 19% (2018 - 19%):

 

 

 

 

 

2019

£000

 

2018

£000

 

 

Profit on ordinary activities before tax

 

 

 

316

 

 

149

 

 

 

 

 

Profit on ordinary activities before tax multiplied

by standard rate of corporation tax in the UK of

19% (2018 - 19%)

 

 

 

60

 

 

 

 

 

28

 

Tax relief that will be obtained by distribution to charitable

parent company

 

(60)

 

 

(28)

 

 

 

 

Total tax charge for the year

-

 

-

                         

 

The company intends to make a gift aid distribution of £316k to its charitable parent company, Cross Keys Homes Ltd, within nine months of the year end. The gift aid payment will be made from distributable reserves, which are expected to be sufficient to cover this amount. The effect of the anticipated distribution will be to reduce the corporation tax payable to nil. In accordance with the provisions of FRS 102, the tax effect of the intended distribution is recognised in the current year's financial statements.

 

 

 

Notes to the financial statements (continued)

 

9.              Fixed asset investments

 

2019

£000

 

2018

£000

 

As at 1 April 2018

 

152,372

 

 

148,289

Additions

-

 

4,022

Unwinding of discounts on NPV

(87)

 

61

 

 

 

 

As at 31 March 2019

152,285

 

152,372

 

During the year the company on-lent the remaining surplus from the premium realised on the sale of retained bonds to its parent company.

 

The loan to the parent company is considered to be a fixed asset investment as it is intended for use on a continuing basis in the Company's activities. The Directors consider such loans to be held for the long term over the life of the related debt.

 

The amounts stated above are all due in more than one year. The total amount repayable on maturity is £150,000,000.

 

 

10.          Debtors - amount falling due within one year

 

2019

£000

 

 

2018

£000

Amounts due from group undertakings

298

 

299

 

 

 

 

 

 

11.            Creditors - amount falling due within one year

 

 

2019

£000

 

2018

£000

Corporation tax

-

 

-

Accrued expenses

297

 

297

 

297

 

297

 

 

12.            Creditors - amounts falling due after more than one year

 

 

2019

£000

 

2018

£000

Bonds

150,000

 

150,000

Less issue price discount

(1,590)

 

(1,650)

Add retained bond issue price premium

3,875

 

4,022

Total

152,285

 

152,372

         

 

Security has been given on amounts due to the Bond investors amounting to £150,000,000. The nature of this security is Cross Keys Homes Limited's housing stock.

 

The repayment profile of the bonds is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts due to the Bond investors

-

 6,375

25,500

287,063

318,938

 

Notes to the financial statements (continued)

 

12.          Creditors - amounts falling due after more than one year (continued)

 

Amounts due to the Bond Investors reflects the gross payments (including interest) due on the £150,000,000 bonds that have been issued to external investors.

 

 

13.          Called up share capital

 

 

Authorised

2019

£000

 

2018

£000

50,000 shares of £1 each

50

 

50

 

 

 

 

 

 

 

 

 

Allocated issued and partly paid

 

 

 

50,000 shares of £1 each 25p paid

12

 

12

 

Upon incorporation the Company issued 50,000 shares of which 25p was paid to provide working capital to establish the business.

 

All shares rank pari passu in all regards.

 

14.          Reserves

 

Retained earnings - includes all current and prior period retained profit and losses.

 

 

15.          Reconciliation of movement in shareholders' funds

 

2019

£000

 

2018

£000

Opening shareholders' funds

161

 

111

Results for the year

316)

 

149

Gift aid distributions less tax relief obtained

(308)

 

(99)

 

 

 

 

Closing shareholders' funds

169)

 

161

 

 

16.          Related party transactions

 

In accordance with paragraph 33.1A of FRS 102, no related party transactions are disclosed as all such transactions were between wholly-owned subsidiaries of the Group.

 

 

17.          Ultimate parent undertaking

 

Cambridgeshire Housing Capital plc is a wholly-owned subsidiary of Cross Keys Homes Limited, which is the ultimate parent and ultimate controlling entity. Cross Keys Homes Limited is the smallest and largest entity in the group that produces consolidated financial statements. Consolidated financial statements of Cross Keys Homes Limited can be obtained from the Company Secretary at Cross Keys Homes, Shrewsbury Avenue, Peterborough, PE2 7BZ.


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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FR CKQDNNBKDACK
Data provided by FE. Care has been taken to ensure that the information is correct, but FE neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.

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